Question: Suppose Baa-rated bonds currently yield 8.4%, while Aa-rated bonds yield 6.4%. Now suppose that due to an increase in the expected inflation rate, the yields

Suppose Baa-rated bonds currently yield 8.4%, while Aa-rated bonds yield 6.4%. 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?

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