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What is the one-year interest rate

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Assume that the real risk-free rate is 1.6%, and that the credit risk, liquidity risk and maturity risk premiums are all zero. A 1-year U.S. Treasury bill yield is 2.10% and a 2-year Treasury note yields 2.55%.

Problem a) What is the 1-year interest rate that is expected for Year 2? Do not round intermediate calculations. Round your final answer to two decimal places.

Problem b) What annual inflation rate is expected during Year 2? Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM132678218

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