12. Problem 6.14 (Expectations Theory and Inflation) Suppose 2-year Treasury bonds yield 4.0%, while 1 -year bonds yield 2.7%.r is 1%, and the maturity risk premium is zero. a. Using the expectations theory, what is the yield on a 1-year bond, 1 year from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the expected inflation rate in Year 1? Year 2? Do not round intermediate calculations. Round your answers to two decimal places. Expected inflation rate in Year 1: \% Expected inflation rate in Year 2: %