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.© BrainMass Inc. brainmass.com February 24, 2021, 2:23 pm ad1c9bdddf
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, ...
What would you expect to happen to the nominal yields on US Treasury Bonds? Explain your answer.