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Assume that the real risk-free rate is 2 percent, that the expected inflation rate during Year 2 is 3 percent, and that 2-year T-bonds yield

Assume that the real risk-free rate is 2 percent, that the expected inflation rate during Year 2 is 3 percent, and that 2-year T-bonds yield 5.5 percent. If the maturity risk premium is zero, what is the inflation rate during Year1?

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