What should be the yield to maturity on risk-free bonds

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The rate of inflation for the next twelve months (Year 1) is expected to be 1.4%; it is expected to be 1.8% the following year (Year Two); and it is expected to be 2.0% every year after Year Two. Assume the real risk-free rate, r*, is 3 percent for all maturities. What should be the yield to maturity on risk-free bonds that mature in (a) one year, (b) five years, and (c) ten years?

Reference no: EM13721771

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