4) The interest rate on conventional 1-year Treasury bonds is 7% and the interest rate on 1-year TIPS (Treasury inflation- protected securities) is 2.5%. You have 100,000 to invest in one of them. a)...

Please answer a,b

Extracted text: 4) The interest rate on conventional 1-year Treasury bonds is 7% and the interest rate on 1-year TIPS (Treasury inflation- protected securities) is 2.5%. You have 100,000 to invest in one of them. a) If you expect the average monthly inflation rate to be 0.5%, which bond offers the higher expected rate of return? b) At what inflation rate per month you will be indifferent?