Question: Inflation is expected to be 5% next year and a steady 7% each year thereafter. Maturity risk premiums are zero for one-year debt but have

Inflation is expected to be 5% next year and a steady 7% each year thereafter. risk premiums are zero for one-year debt but have an increasing value for longer debt. One-year government debt yields 9%, whereas two-year debt yields 11%.
a. What is the real risk-free rate and the risk premium for two-year debt?
b. Forecast the nominal yield on one- and two-year government debt issued at the beginning of the second year.

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