Assuming the same coupon rate and maturity length,the difference between the yield on a Treasury Inflation Indexed Security and the yield on a nonindexed Treasury security provides insight into
A)the nominal interest rate.
B)the real interest rate.
C)the nominal exchange rate.
D)the expected inflation rate.

Question

Quizplus · Accepted Answer

The difference between the yield on a Treasury Inflation-Indexed Security (which adjusts for inflation and thus reflects a real interest rate) and the yield on a non-indexed Treasury security (which reflects a nominal interest rate) provides insight into the expected inflation rate. This difference is often referred to as the inflation risk premium or the break-even inflation rate.

Assuming the Same Coupon Rate and Maturity Length,the Difference Between