) GREY’S STATEMENT REGARDING THE IMPACT OF RITEVAL’S INFLATION SCENARIO IS MOST LIKELY
5.) Grey’s statement regarding the impact of RiteVal’s inflation scenario is most likely:
A.
incorrect because of his comment about real estate.
B.
incorrect because of his comment about equities.
C.
correct.
Answer = A
In deflation, real estate experiences downward pricing pressure (negative) and bonds
benefit from improving purchasing power (positive). Therefore, Grey’s comment about
real estate is incorrect. In equilibrium, inflation at or below expectations is a positive for
equities. The comment about equities is correct.
“Capital Market Expectations,” by John P. Calverley, Alan M. Meder, Brian D. Singer, and
Renato Staub