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Due to a recession, expected inflation this year is only 2.75%. However, the inflation rate in...

Due to a recession, expected inflation this year is only 2.75%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 2.75%. Assume that the expectations theory holds and the real risk-free rate (r*) is 1.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 1.0%, what inflation rate is expected after Year 1?

Madsen Motors's bonds have 24 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 6%, and the yield to maturity is 8%. What is the bond's current market price?

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genius_generous answered 2 years ago
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