You go to the Wall Street Journal and notice that yields on almost all corporate and Treasury bonds have decreased. The yield decreases may be explained by which one of the following?
A)Newly expected decline in the value of the dollar
B)Increases in the U.S. government budget deficit
C)Decreased Japanese purchases of U.S. Treasury bills/bonds
D)An increase in current and expected future returns of real corporate investments
E)A decrease in U.S. inflationary expectations

Question

Quizplus · Accepted Answer

A decrease in inflationary expectations would lead to a decrease in bond yields as investors would demand lower compensation for expected inflation.

You Go to the Wall Street Journal and Notice That