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Suppose most investors expect the inflation rate to be 4% next year, 4% the following year, and 7% thereafter. The real risk free rate is
Suppose most investors expect the inflation rate to be 4% next year, 4% the following year, and 7% thereafter. The real risk free rate is 2.5%. The maturity risk premium is zero for bonds that mature in one year or less and 0.1% for 2year bonds; then the MRP INCREASES by 0.1% per year thereafter for 20years, after which it is stable. what is the interest rate on a 1 year treasury bonds
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