In times of inflation, suppose the nominal interest rate of a bond is higher than the expected inflation rate. If the actual inflation rate turns out to be higher than the expected inflation,
(1) the actual inflation rate will be higher than the nominal interest rate of the bond.
(2) the expected real rate of return of the bond will be greater than the actual real rate of return.
(3) the actual real rate of return of the bond may be negative.
(4) the real rate of return of holding cash will be higher than zero.
A. (1) and (2) only
B. (1) and (4) only
C. (2) and (3) only
D. (3) and (4) only