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Financial calculator Due to a recession, expected inflation this year is only 3.25%. However, the inflation...

Financial calculator
Due to a recession, expected inflation this year is only 3.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.25%. Assume that the expectations theory holds and the real risk-free rate (r*) is 2.25%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 2.25%, what inflation rate is expected after Year 1? Round your answer to two decimal places.

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE.

THERE ARE NO FUNCTIONS TO BE USED ON FINANCIAL CALCULATOR. IT IS A SIMPLE MANUAL CALCULATION.

jeff jeffy answered 1 year ago
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