Question: Assume a ten-year US TIPS note currently yields 0.5%, while a ten-year non-TIPS US Treasury note yields 2.1%. You expect the inflation over the next

Assume a ten-year US TIPS note currently yields 0.5%, while a ten-year non-TIPS US Treasury note yields 2.1%. You expect the inflation over the next ten years to average 2.5% per year and the real rate of interest to remain unchanged. Should you invest in the 10-year regular (non-TIPS) Treasury note or in the 10-year TIPS note? Explain your answer. (Note: you are considering only these two securities.)

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