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 thematurity 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 isestimated 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 intermediatecalculations. Round your answer to two decimal places.%

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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. %

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

Section: Chapter Questions

Problem 1PS

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Concept explainers

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.

Question

100%

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.
%

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Please show working. Please answer 1 and 2 1. The real risk-free rate is 2.75%, and inflation is expected to be 4.00% for the next 2 years. A 2-year Treasury security yields 8.25%. What is the maturity risk premium for the 2-year security? Round your answer to two decimal places. 2. The real risk-free rate is 2.9%. Inflation is expected to be 2.2% this year, 4.8% next year, and 2.65% thereafter. The maturity risk premium is estimated to be 0.05 × (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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