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Basic Question 4 of 10
Which statement about the break-even inflation rate is true?
B. Break-even inflation rates are simply the markets' best guess of future inflation over the relevant investment horizon.
C. The 10-year break-even inflation rate is the sum of θt,10 and πt,10, where θt,10 is the expected 10-year inflation and πt,10 is the risk premium for the uncertainty of the expected 10-year inflation.
A. The 3-month break-even inflation rate is very close to the 3-month expected inflation rate.
B. Break-even inflation rates are simply the markets' best guess of future inflation over the relevant investment horizon.
C. The 10-year break-even inflation rate is the sum of θt,10 and πt,10, where θt,10 is the expected 10-year inflation and πt,10 is the risk premium for the uncertainty of the expected 10-year inflation.
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I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain how the phase of the business cycle affects policy and short-term interest rates, the slope of the term structure of interest rates, and the relative performance of bonds of differing maturities;
describe the factors that affect yield spreads between non-inflation-adjusted and inflation-indexed bonds;
CFA® 2025 Level II Curriculum, Volume 6, Module 37.