4. The theory of asset pricing (not covered in this course), asserts that the price of an asset depends on its average return (also called expected return), and its risk. Using this idea, compare the rates on (a) a long term versus a short term bond, and (b) an inflation protected bond and an ordinary bond with the same maturity. An inflation protected bond has an interest rate which is equal to the rate of inflation plus an additional fixed rate. 4. The theory of asset pricing (not covered in this course), asserts that the price of an asset depends on its average return (also called expected return), and its risk. Using this idea, compare the rates on (a) a long term versus a short term bond, and (b) an inflation protected bond and an ordinary bond with the same maturity. An inflation protected bond has an interest rate which is equal to the rate of inflation plus an additional fixed rate