Question: Baa-rated bonds currently yield 6%, while Aa-rated bonds yield 5%. Suppose that due to an increase in the expected inflation rate, the yields on both

Baa-rated bonds currently yield 6%, while Aa-rated bonds yield 5%. Suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.2%.

Required:

1-Calculate the new confidence index?

Note: Round your answer to 3 decimal places.

2-Would this be interpreted as bullish or bearish by a technical analyst?

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