What is the yield on two-year treasury securities

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The real risk-free rate is 3%. Inflation is expected to be 2% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury securities?

The yield on 2-year treasury securities is ____ and the 3-year yield is ____? Hint: for this problem you will have to average the inflation rates together so that you have only one IP to solve for the problem.

Reference no: EM131836440

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