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The rate of inflation for the next 1 2 months ( Year 1 ) is expected to be 1 . 4 percent; it is expected

The rate of inflation for the next 12 months (Year 1) is expected to be 1.4 percent; it is expected to be 1.8 percent the following year (Year 2); and it is expected to be 2.0 percent every year after Year 2. Assume the real risk-free rate, r*, is 3 percent for all maturities. What should be the nominal risk-free rate on bonds that mature in
(a) one year,
(b) five years, and
(c)10 years?
There is no maturity risk premium (MRP) associated with the bonds. (LO 5-3)

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