Question: 1 what is the 3year inflation premium if expected inflation...
1. What is the 3-year inflation premium if expected inflation in year 1 is 6%, expected inflation in year 2 is 7% and expected inflation in year 3 is 8%? (express your answer as a percentage).
2. The real risk-free rate of interest is 3%. Inflation is expected to be 2% this year and 4% next year. Assume that the maturity risk premium is zero. What is the yield on a 2-year Treasury security? (express your answer as a percentage).
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