In: Finance
Suppose 2-year Treasury bonds yield 5.3%, while 1-year bonds yield 3.6%. r* is 1%, and the maturity risk premium is zero. Negative expected inflation rates, if any, should be indicated by a minus sign.
b. 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.