Expected return on tips

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(HBS case) From the original analysis, the expected return of TIPS was 4% for the next 10 years. But there are some forecasting errors, the future may not be what we forecast.

Suppose there are some errors in the expected return of TIPS when we forecast. We forecasted the expected return of TIPS was 4%, but actually expected return should be 3.7% because of errors we forecasted in the wrong way.

Suppose there is a forecasting error in the expected return on TIPS and the actual one should be 3.7% instead of 4%. What will happen?

Will we have the same conclusion on it?

Will we include inflation index bonds in the policy portfolio or not?

Reference no: EM133079552

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