2. Suppose you have $40,000 to invest.

a. If the current nominal interest rate on savings is 3%, and you expect inflation to increase over the coming year from 2% to 7%, what is the real return you would realize if you put the entire $40,000 in a savings account.

b. If you could buy $40,000 worth of U.S. government Treasury bonds that pay you coupon payments totaling $1,000 at the end of every six months for ten years (i.e., $1,000 every six months for ten years), and then $32,000 at the end of the ten years, should you do so if the interest rate paid on your savings account is 3%?

c. Referring to (b) above, what if the interest rate on your savings account was 7%?