Question: Required: a. Suppose Baa-rated bonds currently yield 7.8%, while Aa-fated bonds yield 5.8%. Now suppose that due to an increase in the expected inflation rate,

Required: a. Suppose Baa-rated bonds currently yield 7.8%, while Aa-fated bonds yield 5.8%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.5%. What would happen to the confidence index? (Round your answers to 4 decimal places.)

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