Question: QUESTION THREE Recent data on inflation shows that inflation which had been subdued for many years now appears to be rising across the world. (a)

QUESTION THREE

Recent data on inflation shows that inflation which had been subdued for many years now appears to be rising across the world.

(a) Evaluate the impact on real and nominal interest rates

(4 marks)

(b) Evaluate the impact on bond portfolios.

(4 marks)

(c) Evaluate the impact on stock portfolios.

(4 marks)

(d) What would you recommend bond portfolio managers to do? Justify your recommendation.

(7 marks)

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