16. The real risk free rate is 2.5%. The maturity risk premium is .1% for 1-year maturities, growing by .2% per year up to a maximum of 1.0%. The interest rate on 4-year treasuries (federal government bonds) is 6.2%, 7.5% on 8-year treasuries, and 8.0% on 10-year treasuries. What conclusions can be drawn about expected inflation rates over the 10-year period?

Transcribed Image Text:

Year Inflation Rate 1234 2% 3 4 5 5-20 6