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Explain what inflation rate is expected

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Consider that the real risk-free rate is 4 % and the maturity risk premium is zero. If the nomincal rate of interest on one-year bonds is 11 percent, and on comparable-risk two year bonds it is 13 percent, what is the one-year interest rate that is expected for Year 2? What inflation rate is expected during Year 2?

Reference no: EM1343988

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