Suppose 2 year Treasury bonds yield 5 , while 1 year bonds yield 3 r is 1 75 , and the maturity risk premium is zero Negative expected inflation rates, if any, should be indicated by a minus sign 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 What is the expected inflation rate in Year 1 Do not round intermediate calculations Round your answer to two decimal places What is the expected inflation rate in Year 2 Do not round intermediate calculations Round your answer to two decimal places

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Question: Suppose 2-year Treasury bonds yield 5%, while 1-year bonds yield 3%. r* is 1.75%, and the maturity risk premium is zero. Negative expected inflation rates,

Suppose 2-year Treasury bonds yield 5%, while 1-year bonds yield 3%. r* is 1.75%, and the maturity risk premium is zero. Negative expected inflation rates, if any, should be indicated by a minus sign.

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.

____________%

What is the expected inflation rate in Year 1? Do not round intermediate calculations. Round your answer to two decimal places.

___________%

What is the expected inflation rate in Year 2? Do not round intermediate calculations. Round your answer to two decimal places.

___________ %

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