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Business, 18.10.2019 01:10 chaparoonie15

Because of a recession, the inflation rate expected for the coming year is only 4%. however, the inflation rate in year 2 and thereafter is expected to be constant at some level above 4%. assume that the real risk-free rate is r* = 2% for all maturities and that there are no maturity premiums. if 3-year treasury notes yield 2 percentage points more than 1-year notes, what inflation rate is expected after year 1?

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