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Question
Assume that a 3-year Treasury note has no maturity premium, and that the real, risk-free rate of interest is 3 percent. If the T-note carries a yield to maturity of 13 percent, and if the expected average inflation rate over the next 2 years is 11 percent, what is the implied expected inflation rate during Year 3?
a. 7%
b. 8%
c. 9%
d. 17%
e. 18%
Answer
This answer is hidden. It contains 148 characters.
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