Question $2$

Assume inflation is expected to be $3\%$ next year, $5\%$ the following year, and $6\%$ thereafter. In

addition, the real interest rate $(r^{**})$ is $4\%,$ and given that the equation of the maturity risk

premium is: $MR{P}_t=0\mathrm{.}6\%(t-1)$

a$.$ Calculate the IP of $1$ year, $2$ years, and $10$ years.

b$.$ Find the maturity risk premium $($MRP$)$ of $1$ year, $2$ years, and $10$ years.

c$.$ Find the appropriate nominal rates of $1$ year, $2$ years, and $10$ years.