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    kat80's Avatar
    kat80 Posts: 2, Reputation: 1
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    #1

    Sep 10, 2007, 02:44 AM
    Topic : Inflation Rates
    Due to a recession, the inflation rate expected for the coming year is only 3 perecent. However, the inflation rate in Year 2 and thereafter is expected to be constant t some level above 3%. Assume that the real risk-free rate is k*= 2% for all maturities and that the expectations theory explains the yield curve,so there are no maturity risk premiums. If 3-year Treasury bonds yield 2 percentage points more than 1-year bonds, what inflation rate is expected after Year 1?
    Curlyben's Avatar
    Curlyben Posts: 18,514, Reputation: 1860
    BossMan
    		  
    #2

    Sep 10, 2007, 02:47 AM
    Please refer to this Announcement
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