Suppose the real risk-free rate of interest is 3% and inflation is expected to be 2% and 3% over the next two years. If a 2-year Treasury security yields 6%, what is the maturity risk premium for the 2-year Treasury security? O 1.5 % O 0.5% O 0.2% O 1.0%

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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Suppose the real risk-free rate of interest is 3% and inflation is expected to
be 2% and 3% over the next two years. If a 2-year Treasury security yields
6%, what is the maturity risk premium for the 2-year Treasury security?
1.5%
0.5%
0.2%
O 1.0%
Transcribed Image Text:Suppose the real risk-free rate of interest is 3% and inflation is expected to be 2% and 3% over the next two years. If a 2-year Treasury security yields 6%, what is the maturity risk premium for the 2-year Treasury security? 1.5% 0.5% 0.2% O 1.0%
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