Suppose $2-$year Treasury bonds yield $3\mathrm{.}4\%,$ while $1-$year bonds yield $2\mathrm{.}6\%.r^{**}$ is $2\%,$ 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 $2$:

$\%$