The real rate of interest is 5,20% and inflation is expected to be 3,60% for the next three years. A three-year treasury security yields 14,89%. What is the maturity risk premium for the three-year security? O 1. 6,09% O2. 8,80% O 3. 9,69% O4. 11,29%

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.