Question: Suppose that the yield (interest) on a three - year Treasury bond is 4 percent and the yield (Interest) on a four year Treasury bond

Suppose that the yield (interest) on a three - year Treasury bond is 4 percent and the yield (Interest) on a four year Treasury bond is 4.5 percent.The MRP for these bonds equal zero.Using the rates on these bonds, estimate the one year interest rate in year 4.If r* = 2% each year, what is the expected inflation rate in year 4?

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