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Dan wubbena predicts that inflation this year is only 3 . 5 % . However, the inflation rate in year 2 and therafter is expected

Dan wubbena predicts that inflation this year is only 3.5%. However, the inflation rate in year 2 and therafter is expected to be constant at some level above 3.5%. Assume that expectation theory holds and the real risk-free rate r*m=2.9%. If the yield on 4-year treasury bonds equals the 1-year yield plus 3%, what inflation rate is expected after year 1. Assume there is no MRP, DRP, and no LP.

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