Question: Over the past year, the required yield on regular 10 year treasury note how decline from 2.65% to 1.47%. Also during the past year the
Over the past year, the required yield on regular 10 year treasury note how decline from 2.65% to 1.47%. Also during the past year the required yield on 10 year treasury inflation protection securities (TIPS) has declined from .915% to -0.15%.
A) What is the relationship between nominal yield to maturity, real yield to maturity and the rate of inflation ( note: you may assume in part B and C that the required real yield to maturity of regular 10 year US treasuries was due to a change in investors' inflation expectations )
B) given the data above, how much of the decline in the required yield to maturity of regular 10 year US treasuries was due to a change in investors inflation expectations?
C) How much of the decline in the required nominal yield to maturity of the 10 year treasury was due to a decline in investor is required will yield to maturity. (You may assume that the required real YTM on regular 10 year treasuries' equals the required YTM on 10 year TIPS.)
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