Assume That a 3-Year Treasury Note Has No Maturity Premium,and

question 18

Multiple Choice

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%

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Definitions:

Cafeteria Compensation

A flexible employee benefits plan allowing employees to choose from a variety of pre-tax benefits, akin to selecting from a cafeteria menu.

Piece Rate

A wage calculation method where an employee is paid a fixed rate for each unit produced or action performed.

Compensation

Refers to the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.

Time-Based

Relating to, measuring, or measured by the passage of time, often used in contexts like billing, scheduling, or productivity analysis.