i was doing schweser practice exam 1 and a question got me really really confused when expected inflation is high, the return on cash instruments increased and it it likely that the central bank will raise rates to curb inflation. the return on cash instruments will increase as the bank’s targeted rate increases. why would the return on cash instruments increase when expected inflation is high?? why the return on cash instruments increase as the bank’s targeted rate increase?? are cash instruments short-term loans? if they are, shouldnt their return decrease when interest rates go up???
I guess they are talking about very very short term money market products, which are rolled several times during the year at increasing short market rates (as rates are increasing with inflation going up) not sure about this, though
thx haha, that makes sense now
think about your savings acount. I want my 5.25% back!
Or you short-term CD from your local credit union.