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Required: a. Suppose Bad-rated bonds currently yield 7.0%, whlle Aa-rated bonds yield 5.0%. Now suppose that due to an increase in the expected inflation rate,

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Required: a. Suppose Bad-rated bonds currently yield 7.0\%, whlle Aa-rated bonds yield 5.0%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.2%. What would happen to the confidence index? (Round your answers to 4 decimal places.)

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