One-year inflation rate for year three implied by data

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The real risk-free rate is 1.53%. Inflation is expected to be 2.46% this year and 3.77% next year. The maturity risk premium is estimated to be equal to 0.11%(t-1), where t equals the maturity of a bond in years. All treasuries are assumed to have no liquidity or default risk. Three-year treasuries yield 0.58% more than two-year treasury bonds. What is the expected one-year inflation rate for year 3 implied by this data? State your answer as a percent to two decimal places.

Reference no: EM131047487

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