The real risk-free rate is 3 percent.  Inflation is expected to be 3.5 percent this year, 4.5 percent next year, and 5 percent thereafter.  The maturity risk premium is estimated to be 0.14 ´ (t - 1)%, where t is the number of years to maturity.  What is the yield on a 6-year Treasury note?   a. 0.84%   b. 8.70%   c. 8.37%   d. 7.20%   e. 7.67%

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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.