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

a) Assuming the nominal yield rises by an amount equal to the rise in expected amount equal to the rise in expected inflation, compute the change in the price of the bond.

b) Suppose that expected inflation is still 2 percent, but the probablity that it will move to 3 percent has risen. Describe the cosnequences for the price of the bond.