On January 1, you observe that the 2-year note yields 2.5% and the 3-year note rate is
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On January 1, you observe that the 2-year note yields 2.5% and the 3-year note rate is 3.3%. Market participants are certain that the real rate will remain unchanged at 2.9% over the next three years. What do investors believe inflation will be during the third year? Assume there is no risk premium or liquidity premium influencing these rates and ignore the interaction term in the Fisher equation.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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