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Assume that the real risk-free rate is 1.8% and that the maturity risk premium is zero....

Assume that the real risk-free rate is 1.8% and that the maturity risk premium is zero. If a 1-year Treasury bond yield is 6% and a 2-year Treasury bond yields 6.5%. Calculate the yield using a geometric average.

  1. What is the 1-year interest rate that is expected for Year 2? Do not round intermediate calculations. Round your answer to two decimal places.

    %
  2. What inflation rate is expected during Year 2? Do not round intermediate calculations. Round your answer to two decimal places.

    %
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