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Maple Farms was just issued a loan for two years last week at 12%. The pure rate is 2%, the company's default risk premium is
Maple Farms was just issued a loan for two years last week at 12%. The pure rate is 2%, the company's default risk premium is 2.7% and a liquidity risk premium of 1.6%. The maturity risk premium for two-year loans is 1%. Inflation is expected to be 3% for the loan. Using the interest rate model, what does the lender expect the inflation rate to be in year 2 of the loan? Round your answer to one decimal place. Remember Inflation is an average value in year 2 . Solve for Inflation value used for the 2 calculation rate for year 2. That value is the average over the 2 years. Round your answer to one decimal place and add a % sign
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