Calculate the yield using a geometric average

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Reference no: EM132003076

Suppose 2-year Treasury bonds yield 4%, while 1-year bonds yield 3%. r* is 1.5%, and the maturity risk premium is zero.

Using the expectations theory, what is the yield on a 1-year bond, one year from now?

Calculate the yield using a geometric average. %

What is the expected inflation rate in Year 1? %

What is the expected inflation rate in Year 2? %

Reference no: EM132003076

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