If the Yield to Maturity for a Par Value TIPS

question 61

Multiple Choice

If the yield to maturity for a par value TIPS bond with eight years to maturity is 3 percent, and the yield to maturity of a U.S Treasury note with 8 years is 4.25 percent, this implies that

• A) the expected annual rate of inflation over the next eight years is -1.25 percent.
• B) the expected annual rate of inflation over the next eight years is 1.25 percent.
• C) the expected annual rate of inflation over the next eight years is -2.25 percent.
• D) the expected annual rate of inflation over the next eight years is 2.25 percent.
• E) the expected annual rate of inflation over the next eight years is 0 percent.

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Definitions:

Sensory Threshold

The minimum level of intensity from a stimulus that is detected by a sense organ, marking the boundary between non-detectable and detectable sensations.

Stimuli

External factors or signals that provoke a response from a sensory system or organism.

Backward Messages

Reversed audio or visual stimuli that are claimed to be perceptible and meaningful when experienced in a normal forward mode, often discussed in the context of subliminal messages.

Rock Songs

Musical compositions typically featuring guitars and drums, influenced by rock and roll and blues, with memorable melodies and strong backbeats.