The real risk-free rate is 2 percent, and inflation is expected to be 3 percent next year and 6 percent for the following 3 years.  Assume that the maturity risk premium is zero.  What is the yield on 2-year Treasury securities?   a. 8.00%   b. 6.50%   c. 2.00%   d. 5.00%   e. 11.00%

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Q: 38. Compounding intervals (S2.4) You are quoted an interest rate of 6% on an investment of $10…

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Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.