Business, 20.09.2019 02:10 Pizzapegasus1

Due to a recession, expected inflation this year is only 2%. however, the inflation rate in year 2 and thereafter is expected to be constant at some level above 2%. assume that the expectations theory holds and the real risk-free rate (r*) is 3.5%. if the yield on 3-year treasury bonds equals the 1-year yield plus 3.5%, what inflation rate is expected after year 1? round your answer to two decimal places.

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Due to a recession, expected inflation this year is only 2%. however, the inflation rate in year 2 a...