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Question
In the next two years, the expected inflation rates are 1 percent and 2 percent, respectively, and the real interest rates are expected to be 4 percent and 4 percent, respectively. Using this information, calculate the two-year interest rate yield as of now.
a) 1.88 percent.
b) 2.74 percent.
c) 4.94 percent.
d) 5.56 percent.
Answer
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