Question: eBook Suppose 2-year Treasury bonds yield 4.4%, while 1-year bonds yield 3.8%. r* is 1%, and the maturity risk premium is zero. a. Using the

eBook Suppose 2-year Treasury bonds yield 4.4%, while 1-year bonds yield

eBook Suppose 2-year Treasury bonds yield 4.4%, while 1-year bonds yield 3.8%. r* is 1%, and the maturity risk premium is zero. a. 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. % % b. What is the expected inflation rate in Year 1? Year 2? Do not round intermediate calculations. Round your answers to two decimal places. Expected inflation rate in Year 1: % Expected inflation rate in Year 2: 4.00 %

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