Which of the statements given above is/are correct?
a) 1 only b) 2 only c) Both 1 and 2 d) Neither 1 nor 2
Correct Answer: Option (a)
For debtors, “real” interest rate goes down with inflation. Thus, it benefits them. On the other hand, with inflation the yield of bonds goes down, thus a negative effect for bond-holders. Hence, option (a) is correct.
In case you still have your doubts, contact us on 9811333901.
