The market consensus is that U.S. inflation will remain low, averaging 1% over the next 3 years. However you perceive that inflation may be higher than market estimates, averaging 2% per year. How would this affect the price you would be willing to pay for the bond?

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
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The market consensus is that U.S. inflation will remain low, averaging 1% over the next 3

years. However you perceive that inflation may be higher than market estimates, averaging

2% per year. How would this affect the price you would be willing to pay for the bond?

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