What must be the forecasted inflation rate in year

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Reference no: EM13934820

Suppose the real risk-free rate currently is 3% and a maturity risk premium of 0.15% per year to maturity applies, i.e., MRP=0.15%*t, where t is the years to maturity. The averaged expected inflation rate over the next following 3 years is 2.5%. If the current 4-year T-bond's yield is 6%, what must be the forecasted inflation rate in year 4?

Reference no: EM13934820

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