An article in the New York Times notes that​ "rising bond yields can ... signal the threat of​ inflation." ​Source: Nelson D.​ Schwartz, "Surprise Increase in Rates Is Credited to Signs of​ Recovery," New York Times​, March​ 18, 2012. If investors expect inflation to be​ higher: A. the yields on bonds will rise because investors will demand more bonds at the current interest rates causing the price of bonds to increase. B. the yields on bonds will fall because the price of bonds will fall due to the higher level of inflation. C. the yields on bonds will rise because investors will need a higher rate of return on the bonds they are purchasing. D. the yields on bonds will fall because the higher inflation rate will reduce the real interest earned on the bonds and causing the yields to decrease.

Suppose that jim plans to borrow money for an education at texas a& m university. jim will need to borrow $25,000 at the end of each year for the next five years (total=$125,000). jim wishes his parents could pay for his education but they can’t. at least, he qualifies for government loans with a reduced interest rate while he is in school. he has a special arrangement with aggiebank to lend him the money at a subsidized rate of 1% over five years without having to make a payment until the end of the fifth year. however, at the end of the fifth year, jim agrees to pay off the loan by borrowing from longhorn bank. longhorn bank will lend him the money he needs at an annual interest rate of 6%. jim agrees to pay back the longhorn bank with 20 annual payments and the payments will be uniform (equal annual payments including principal and interest). (i) calculate how much money jim has to borrow at the end of 5 years to pay off the loan with aggiebank. a. $121,336 b. $127,525 c. $125,000 d. $102,020 e. none of the above