Answered: If the yield on a 5-year Treasury bond…

If the yield on a 5-year Treasury bond is 7.38% and the yield on a 6-year Treasury bond is 7.88%, the expected inflation in 6 years is (Hint: Do not round intermediate calculations.)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 7PROB

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

If the yield on a 5-year Treasury bond is 7.38% and the yield on a 6-year Treasury bond is 7.88%, the expected inflation in 6 years is
(Hint: Do not round intermediate calculations.)
Step 3: Practice: Inflation and Interest Rates

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