If the Yield to Maturity for a Par Value Inflation-Indexed

question 23

Multiple Choice

If the yield to maturity for a par value inflation-indexed bond with 8 years to maturity is 3%, and the yield to maturity of a Canadian Treasury note with 8 years is 4.25%, this implies that

• A) The expected annual rate of inflation over the next 8 years is -1.25%.
• B) The expected annual rate of inflation over the next 8 years is 1.25%.
• C) The expected annual rate of inflation over the next 8 years is -2.25%
• D) The expected annual rate of inflation over the next 8 years is 2.25%
• E) None of the above.

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