Suppose that the yield on a 30-year junk bond is 9.13% and the yield on a short-term 5-year bond is 5.9%. Suddenly, inflation (accompanied by rapid expansion) hits the economy. The yield on the short-term bond goes up from 5.9% to 7.9%, and the yield on the junk bond goes up from 9.13% to 9.2%. Calculate the capital loss on these two bonds, assuming that before inflation, the two bonds sold at par, which is $1000. In light of your results, explain the argument that some junk bonds with long maturities have the interest-rate sensitivity of shorter investments. If you are worried more about inflation than a depression, junk is a very attractive alternative to long Treasures. (Hint: consider the risk of bankruptcy.)