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34. The real risk-free rate of interest is 3%, and it is expected to be constant over time. Expected inflation is expected to be 3% in Year 1, 4% in Year 2, and 5% in Year 3. Maturity risk premium is 0. What is the interest rate on Treasury securities with three year maturity? (Format: XXX%)

34. The real risk-free rate of interest is 3%, and it is expected to be constant over time. Expected inflation is expected to be 3% in Year 1, 4% in Year 2, and 5% in Year 3. Maturity risk premium is 0. What is the interest rate on Treasury securities with three year maturity? (Format: XXX%)

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
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34.The real risk-free rate of interest is 3%, and it is expected to be constant over time. Expected inflation is expected to be 3% in Year 1, 4% in Year 2, and 5% in Year 3. Maturity risk premium is 0. What is the interest rate on Treasury securities with three year maturity? (Format: X.XX%)
Transcribed Image Text:34.The real risk-free rate of interest is 3%, and it is expected to be constant over time. Expected inflation is expected to be 3% in Year 1, 4% in Year 2, and 5% in Year 3. Maturity risk premium is 0. What is the interest rate on Treasury securities with three year maturity? (Format: X.XX%)
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Step 1

Given that,

The real risk-free rate of interest is 3%, and it is expected to be constant over time. Expected inflation is expected to be 3% in Year 1, 4% in Year 2, and 5% in Year 3. Maturity risk premium is 0.

Real risk free rate = 3%

Inflation rate:

Year 1 = 3%

Year 2 = 4%

Year 3 = 5%

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