Question: Problem 4 Intro 1-year T-bills yield 4.5% and 2-year Treasury notes yield 8.5%. The real risk-free rate of interest is 3.5% and expected to stay

Problem 4 Intro 1-year T-bills yield 4.5% and 2-year Treasury notes

Problem 4 Intro 1-year T-bills yield 4.5% and 2-year Treasury notes yield 8.5%. The real risk-free rate of interest is 3.5% and expected to stay constant, while the maturity risk premium is zero. Part 1 1 | Attempt 1/18 for 10 pts. Using the expectations theory, what is the yield on a 1-year risk-free bond, one year from now? 3+ decimals Submit | Attempt 1/18 for 10 pts. Part 2 What is the expected inflation rate in Year 1? 4+ decimals Submit Attempt 1/18 for 10 pts. Part 3 What is the expected inflation rate in Year 2? 3+ decimals Submit

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