Question: Suppose 2-year Treasury bonds yield 3.5%, while 1 -year bonds yield 2.6%, r is 1%, and the maturity risk premlum is zero. a. Using the

Suppose 2-year Treasury bonds yield 3.5%, while 1 -year bonds yield 2.6%, r is 1%, and the maturity risk premlum is zero. a. Using the expectations theory, what is the yleld 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 17 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

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