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QUESTION 7 All bonds have equal risk of default and thuspay equal rates of interest. True False QUESTION 8 When expected infl

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Answer #1

7. False

DIfferent bonds have different default risk and corresponding interest rates.

8. True

Real rate (R) = Nominal rate (N) - Inflation rate (F)

When F increases, R decreases.

9. A

R = 1.7 - 0.8 = 0.9%

10. D

R = 1.7 - 0.5 = 1.2%

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