The real risk-free rate is 2.5% and inflation is expected to be 2.75% for the next 2 years. A 2-year Treasury security yields 6.75%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place. %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The real risk-free rate is 2.5% and inflation is expected to be 2.75% for the next 2 years. A 2-year Treasury security yields 6.75%. What is the
maturity risk premium for the 2-year security? Round your answer to one decimal place.
%
Transcribed Image Text:The real risk-free rate is 2.5% and inflation is expected to be 2.75% for the next 2 years. A 2-year Treasury security yields 6.75%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place. %
The real risk-free rate is 2.65%. Inflation is expected to be 3.65% this year, 4.35% next year, and 2.7% thereafter. The maturity risk premium is
estimated to be 0.05 x (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate
calculations. Round your answer to two decimal places.
%
Transcribed Image Text:The real risk-free rate is 2.65%. Inflation is expected to be 3.65% this year, 4.35% next year, and 2.7% thereafter. The maturity risk premium is estimated to be 0.05 x (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places. %
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