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Assume that the real risk-free rate is 1.8%, and that the credit risk, liquidity risk and maturity risk premiums are all zero. A 1-year U.S.
Assume that the real risk-free rate is 1.8%, and that the credit risk, liquidity risk and maturity risk premiums are all zero. A 1-year U.S. Treasury bill yield is 2.3% and a 2-year Treasury note yields 2.75%. Calculate the yield using a geometric average.
a).What is the 1-year interest rate that is expected for Year 2?Do not round intermediate calculations. Round your final answer to two decimal places.
b) What inflation rate is expected during Year 2?Do not round intermediate calculations. Round your answer to two decimal places.
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