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Suppose you and other investors expect that inflation will be 3% next year, to rise to 5% during the following year, and then to remain

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Suppose you and other investors expect that inflation will be 3% next year, to rise to 5% during the following year, and then to remain at 6.6% thereaftec. Further, you expect that the real risk free rate of interest will remain at 2% and the maturity risk premium on treasury socurities will rise from 2% for one year bonds: Maturity risk premlums are expected to increase 0.2% for each year to maturity up to a limit of 1.0 percentage point on 5 -year or longer ferm T-tonds. What is the retum on a 4-year bond? Write your answer as a decimal (i.e. 8% is 0.08)

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