) 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