The real risk-free rate is 249 inflation is expected to be, Ask an Expert

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The real risk-free rate is 2.49%. Inflation is expected to be 2.06% this year and 3.7% next year. The maturity risk premium is estimated to be equal to 0.14%(t-1), where t equals the maturity of a bond in years. All treasuries are assumed to have no liquidity or default risk. Three-year treasuries yield 0.37% more than two-year treasury bonds. What is the expected one-year inflation rate for year 3 implied by this data? State your answer as a percent to two decimal places.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91768556

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