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Nominal Yield

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Suppose that as a result of a recession consumer expectations of annual inflation declined from 2% to 1.5% and, at the same time, the expected real rate of return required to equate investor demand to the existing supply of default risk- free Treasury bonds declined from 3% to 1%. What would you expect to happen to the nominal yields on US Treasury Bonds? Explain your answer.

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What would you expect to happen to the nominal yields on US Treasury Bonds? Explain your answer.

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Nominal Yield (also known as 'flat yield')
<br>This is calculated by dividing the annual income on the bond by its nominal or 'par' value. Since this yield is nominal, ...

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