Question: Suppose the Treasury issues two 5- year bonds. One is an ordinary bond that offers a fixed nominal coupon rate of 4 percent. The other

Suppose the Treasury issues two 5- year bonds. One is an ordinary bond that offers a fixed nominal rate of 4 percent. The other bond is an inflation- indexed bond (or TIPS). When the TIPS bond is issued, will it have a rate of 4 per-cent, more than 4 percent, or less than 4 percent?

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