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the inflation rate expected for the coming year is only .5 percent. however, th inflation rate in year 2 and thereafter is expected to be
the inflation rate expected for the coming year is only .5 percent. however, th inflation rate in year 2 and thereafter is expected to be constant at some level above .5 percent. assume the real risk free rate is 1.5% for all maturities and that the expectations theory fully explains the yield curve. if 5-year treasury bond yield 1.8 percentage points more than 1 year treasury bonds, what inflation rate is expected after year 1?
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