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:

Stimulation

The action of encouraging or arousing interest, activity, or enthusiasm in a biological, physical, or chemical system.

Below The Knee

Referring to a location or point on the leg that is situated lower than the knee joint.

Abbreviation

A shorter variant of a word or phrase.

Above The Knee

describes a location, procedure, or amputation that occurs higher on the leg than the knee.