Compute the expected inflation rate for the next 12 months

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Reference no: EM13293313

According to the wall street journal, the interest rate on one-year treasury bonds is 2.2 percent, the rate on two-year treasury bonds is 3.0 percent, and the rate on three-year treasury bonds is 3.6 percent. These bonds are considered risk free, so the rates given here are risk-free rates. The one-year bond matures on year from today, the 2 year bond matures 2 years from today and so forth. The real risk-free rate for all 3 years is 2 percent. Using the expectations theory, compute the expected inflation rate for the next 12 months.

Reference no: EM13293313

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