0.05 note? 1%, where t = number of years to maturity. What is the yield on a 7-year Treasury 6-10 INFLATION Due to a recession, expected inflation this year is only 3.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.25%. Assume that the expectations theory holds and the real risk-free rate (r) is 2.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 1.5%, what inflation rate is expected after Year 1? 6. 11 DEFAULT RISK PREMIUM oldin 70/ or Treau