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29) Assume the following returns and yields: U.S. T-bill = 8%, 5-year U.S.T-note = 7%, IBM common stock = 15%, IBM AAA Corporate Bond -12%
29) Assume the following returns and yields: U.S. T-bill = 8%, 5-year U.S.T-note = 7%, IBM common stock = 15%, IBM AAA Corporate Bond -12% and 10-year U.S. T-bond -6%. Based on this information, the shape of the yield curve is (T-note has maturity between 1 to 10 years, T-bond longer than 10 years) A. upward sloping B. downward sloping C. flat D. normal 30) Nico Nelson, a management trainee at a large New York-based bank, is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent? A. 5% B. 1% C. 3% D. 2%
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