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QUESTION
The real risk-free rate is 3%. Inflation is expected to be 2 percent this year (Year 1) and 4 percent during the next two years (Years 2 and 3)....
The real risk-free rate is 3%. Inflation is expected to be 2 percent this year (Year 1) and 4 percent during the next two years (Years 2 and 3). Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury securities?
