For the next four years, inflation is expected to be 3% annually. For the four years after that, it is expected to be 4% annually.
a) Calculate the inflation premium for a bond maturing in 6 years. Show your work in exquisite detail. Express the answer in % to 2 decimal places.
b) Calculate the inflation premium for a bond maturing in 8 years. Show your work. Express the answer in % to 2 decimal places.
c) [review] Express the answer in b) above in bps