Investment and Rate

The inflation rate is constantly changing every day. The entire investment community is always on the look out for what the future inflation rate may be. It has been proven that a healthy economy preforms best when inflation rate is

3. A 2 – year Treasury security currently earns 5.13%. Over the next 2 years, the real

(c)TIPS are simultaneously related to change of inflation rate which means the principal and coupon will adjust instantly to change of inflation rate. TIPS like Regular Treasury bonds

Levin, A. T., Johannsen, B. K., & Beechey, M. J. (2011). Are long-run inflation expectations anchored more firmly in the euro area than in the united states?. American Economic Journal: Macroeconomics, 3(2), 104 - 129. doi:

In 1981, the inflation rate was the highest, it was about 12.50%. After that, the inflation rate was decreasing and later on its ups and downs. The inflation rate was the lowest in

Prices change because of the economy. Inflation is represented as a rise in the general price level. For example, prices of many goods and services such as housing, apparel, food, transportation, and fuel must be increasing in order for inflation to occur in the overall economy. If prices of just a few types of goods or services are growing, there isn’t necessarily inflation. Demand-Pull Inflation and Cost-Push In  cause an increase in the overall price level within an economy.  The Federal Reserve carried an informal inflation goal over a long period, only making its policy official in January of 2012, when it announced that it thought a policy which targets a 2% rate of inflation "is most consistent over the longer run with the Federal Reserve's statutory

There are also many economists who would agree with the claim that zero inflation is the optimal rate of inflation. This claim employs

What would happen to the price, current yield, and total return of each bond over time assuming constant future interest rates?

The discussion of whether the Federal Reserve should raise the federal funds rate is a highly contentious one. Members of the Federal Reserve (“Fed”) and academic economists disagree about what constitutes appropriate future macroeconomic policy for the Unites States. In the past, the Fed had been able to raise rates when the unemployment rate was under 5% and inflation was at a target of 2%. Enigmatically, since the Great Recession and despite a strengthening economy, year-over-year total inflation since 2008 has averaged only 1.4%—as measured by the Personal Consumption Expenditures Price Index (“PCE”). Today, PCE inflation is at 1-1.5% and has continuously undershot the Fed’s inflation target of 2% three years in a row. (Evan 2015) In the six years since the bottom of the Great Recession the U.S. economy has made great strides in lowering the published unemployment rate from about 10% back down to about 5.5%. In light of this data, certain individuals believe that the Federal Reserve should move to increase the federal funds rate in 2015 because unemployment is near 5% and inflation should bounce back on its own (Derby 2015). However, this recommendation is misguided.

This is easy: just calculate how the index changes from year to year in percentage terms.

15. You are trying to decide how to invest your retirement savings. Over the past three years, stock #1

2. Suppose that from January 2011 to January 2012, the inflation rate was 6 percent

b. If only $18,000 is invested, what annual interest rate is needed to produce the needed

Inflation rate risk, when inflation goes up, the price of the bond usually goes down.

What did the analyst from the Treasury Staff mean by his comment about inflation? Do you agree with it?