You are considering the choice between investing $25,000 in a conventional 1- year bank CD offering an interest rate of 4% and a 1-year "Inflation-Plus" CD offering 1.25% per year plus the rate of U.S. consumer price inflation ("CPI").

a. Which is the safer investment?

b. Which CD offers the higher return?

c. Assuming the bank is indifferent between these two interest rate formulae, what is the bank's implied expected rate of inflation for the coming year?