A 10-year zero-coupon bond has a yield of 6 percent. Through a series of unfortunate circumstances, expected infl ation rises from 2 percent to 3 percent.

a. Compute the change in the price of the bond.

b. Suppose that expected infl ation is still 2 percent, but the probability that it will move to 3 percent has risen. Describe the consequences for the price of the bond.