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One-year treasury bills are yielding 12% and two-year treasuries notes are yielding 15%. The maturity risk premium is 0% for one-year debt and 1% for
One-year treasury bills are yielding 12% and two-year treasuries notes are yielding 15%. The maturity risk premium is 0% for one-year debt and 1% for two-year debt. The real risk-free rate is 3.6%. What is the expected rate of inflation for year 2 ? (Hint: Set up a separate model for each term with the yearly inflation rates as unknowns.) Use the interest rate model to solve. Round your answer to one decimal place and add \% sign
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