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Which is the better investment

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Reference no: EM133042738

Question - You are considering the choice between investing $10,000 in a conventional 1-year bank certificate of deposit (CD) offering an interest rate of 6% and a 1-year Inflation-Plus certificate of deposit (CD) offering 1.5% per year plus the rate of inflation.

a) Which is the safer investment?

b) Which offers the higher expected return?

c) Because of the quantitative easing operation by many central banks, you expect the rate of inflation to be 4% over the next year, which is the better investment? Why?

Reference no: EM133042738

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