Over the last year the inflation rate was 3.8 percent and the
interest rate on US Treasury Bonds was slightly below 2 percent. As
an investor in bonds
a. what would you expect to happen to interest rates?
b. using the three bond rules, in terms of prices, maturity, and
coupon rates, what type of bonds should an investor purchase?
Explain.
c. Which bond is more price sensitive, a zero coupon 20 year to
maturity government issued bond or a...