15 Problem 6 14 Suppose 2 year Treasury bonds yield 5 7 , while 1 year bonds yield 6 4 r is 1 75 , and the maturity risk premium is zero Use minus sign for any negative expected inflation rate Using the expectations theory, what is the yield on a 1 year bond 1 year from now Calculate the yield using a geometric average Do not round intermediate calculations Round your answer to two decimal places What is the expected inflation rate in Year 1 Do not round intermediate calculations Round your answer to two decimal places What is the expected inflation rate in Year 2 Do not round intermediate calculations Round your answer to two decimal places

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Question: 15. Problem 6.14 Suppose 2-year Treasury bonds yield 5.7%, while 1-year bonds yield 6.4%. r* is 1.75%, and the maturity risk premium is zero. Use

15. Problem 6.14

Suppose 2-year Treasury bonds yield 5.7%, while 1-year bonds yield 6.4%. r* is 1.75%, and the maturity risk premium is zero. Use minus sign for any negative expected inflation rate.

Using the expectations theory, what is the yield on a 1-year bond 1 year from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places. %
What is the expected inflation rate in Year 1? Do not round intermediate calculations. Round your answer to two decimal places. % What is the expected inflation rate in Year 2? Do not round intermediate calculations. Round your answer to two decimal places. %

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