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:

Generating and Storing Solar Energy

The process of converting sunlight into electricity and storing that energy for later use.

Mandatory Retirement

A policy or rule that requires employees to retire at a certain age regardless of their wish or capability to continue working.

Labor Force

The total number of people employed and unemployed, who are actively looking for work and capable of working.

Marginal Benefit Curve

A graphical representation showing how the benefit (utility or satisfaction) to a consumer changes as consumption of a good or service increases.