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Suppose, you are planning to put away $20000 of your savings for one year. You haye the following options: 1.) Buy an indexed sayings bond
Suppose, you are planning to put away $20000 of your savings for one year. You haye the following options: 1.) Buy an indexed sayings bond that earns 8.00% interest rate for the next year or, 2.} Buy a non-indexed savings bond that earns 12.50% interest rate for the next year. The inflation rate for the next year is expected to be 4.50%. Which option will you choose for the next year\"? aft A. It does not matter whether the indexed or the non-indexed bonds are chosen; since they pay the same real rate of interest. {'1 E. The rate of inflation should not play a role in making this decision. {it C. The non-indexed bond should be chosen as it pays a higher rate of interest. {it D. The indexed bond option should be chosen as it protects from inflation
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