You are considering the choice between investing $50,000 in a conventional 1-year bank CD offeringan interest rate of 5% and a 1-year Inflation Plus CD offering 1.5% per year plus the rate of inflation

a. Which is the safer investment?

b. Which offers the higher expected return?

c. If you expect the rate of inflation to be 3% over the next year, which is the better investment?

d. If we observe a risk-free nominal interest rate of 5% per year and a risk free real rate of 1.5% oninflation-indexed bonds, can we infer that the market expected rate of inflation is 3.5% per year?