Theory: No investor would willingly hold a bond (which carries some risk) that pays a negative nominal interest rate when he/she could carry cash with the zero nominal interest rate. FRED Severnment...

Extracted text: Theory: No investor would willingly hold a bond (which carries some risk) that pays a negative nominal interest rate when he/she could carry cash with the zero nominal interest rate. FRED Severnment Bond d10yMan uing nmarkfor Germany venment Bond eid 10yMannduding Bendmar for pan Long Tem Gevementond e 10yr Man udingendmarfor france uding Bendmarkfor Sweden mentnd 10y 84 42 my 44 2021 and Development Empirical Evidence: The chart above shows the nominal interest rate on 10-year govemment bonds for Germany, Japan, France, and Sweden, respectively, from 2015 to the present. We observe that nominal interest rate on 10-year government bond has been negative at least once for each country during this interval. Why does theory disagree with the evidence? Explain.