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For example, if you know that the real rate of interest is 5% and it is expected to remain constant for the next 3 years,

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For example, if you know that the real rate of interest is 5% and it is expected to remain constant for the next 3 years, inflation is expected to be 1.60% next year, 3.60% the following year, and 4.70% the third year, then the average expected inflation rate over the next three years is 31005+3605+4.70=3.30%. If also you can estimate that the maturity risk premium is 0.1(t1)%, where t is number of years to maturity, then the yield on a 1-year Treasury bill, which has neither default risk premium nor liquidity risk premlum, is as follows: 1=r+IP1+MRP1=5%+1.00%+0.1(11)%=6.60% Complete the following table by cakculating yields an a 2- and 3-year Treasury bils, nespectivey

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