Suppose the real risk-free rate of interest is r*=4% and it is expected to remain constant over time. Inflation is expected to be 1.60% per year for the next two years and 3.90% per year for the next three years. The maturity risk premium is 0.1(t1)%, where t is number of years to maturity, a liquidity premium is 0.35%, and the default risk premium for a corporate bond is 1.50%.

a. The average inflation during the first 4 years is

b. What is the yield on a 4-year Treasury bond?

c. What is the yield on a 4-year BBB-rated bond?

d. If the yield on a 5year Treasury bond is 7.38% and the yield on a 6year Treasury bond is 7.88%, the expected inflation in 6 years is ___(Hint: Do not round intermediate calculations.)