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Assume that the real risk-free rate is 2% and that the maturity risk premium is zero. A) If a 1-year Treasury bond yield is 7%

Assume that the real risk-free rate is 2% and that the maturity risk premium is zero.

A) If a 1-year Treasury bond yield is 7% and a 2-year Treasury bond yields 11%, what is the 1-year interest rate that is expected for Year 2?

B) What inflation rate is expected during Year 2?

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