Suppose $2-$year Treasury bonds yield $4\mathrm{.}2\%,$ while $1-$year bonds yield $2\mathrm{.}9\%.r^{**}$ 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.

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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 $1$:

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Expected inflation rate in Year $2$:

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