Determinants of Interest Rate for Individual Securities A 2-year Treasury security currently earns 6.75 percent. Over the next two years, the real interest rate is expected to be 3.18 percent per year and the inflation premium is expected to be 2.18 percent per year. What is the maturity risk premium on the 2-year Treasury security?

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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Determinants of Interest Rate for Individual Securities A 2-year Treasury security currently earns 6.75 percent. Over the next
two years, the real interest rate is expected to be 3.18 percent per year and the inflation premium is expected to be 2.18 percent
per year. What is the maturity risk premium on the 2-year Treasury security?
Transcribed Image Text:Determinants of Interest Rate for Individual Securities A 2-year Treasury security currently earns 6.75 percent. Over the next two years, the real interest rate is expected to be 3.18 percent per year and the inflation premium is expected to be 2.18 percent per year. What is the maturity risk premium on the 2-year Treasury security?
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