Q1. (a) Suppose the ex ante real interest rate is 2% and the nominal short rate is 5%. What is the expected inflation ra

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answerhappygod
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Q1. (a) Suppose the ex ante real interest rate is 2% and the nominal short rate is 5%. What is the expected inflation ra

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Q1. (a) Suppose the ex ante real interest rate is 2% and
the nominal short rate is 5%. What is the expected inflation
rate? [3 marks]
(b) Suppose a two-year coupon bond has a face value of 1000, a
yield to maturity (YTM) of 5% and its price is 950. What is the
annual coupon? What is the coupon rate? [4 marks]
(c) Give a one line intuitive interpretation of the YTM on a
bond. [3 marks]
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