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The Wall Street Journal quotes the yield on five-year Treasury bonds as 5.4 percent. Also, the current one- year Treasury bond has a yield of
The Wall Street Journal quotes the yield on five-year Treasury bonds as 5.4 percent. Also, the current one- year Treasury bond has a yield of 5 percent. If the real risk-free rate is 3 percent and is expected to remain constant, and there is no maturity risk premium, what is the average annual expected inflation for the four- year period during Years 2 through 5?
a. 0.63% b. 5.50% c. 1.10% d. 2.50% e. 0.50%
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