Using the expectations theory what is the yield on a 1-

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Suppose 2 year Treasury bonds yield 4.5%, while 1 year bonds yield 3%, r* is, and the maturity risk premium is zero.

a. Using the expectations theory, what is the yield on a 1- year bond 1 year from now?

b. What is the expected inflation rate in Year 1 ? Year 2?

Reference no: EM13567846

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