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The real risk-free rate is 4%. Inflation is expected to be 2% this year, 3% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0006 \times (t-1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places. %

The real risk-free rate is 4%. Inflation is expected to be 2% this year, 3% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0006 \times (t-1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places. %

Essentials Of Investments
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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The real risk-free rate is 4%. Inflation is expected to be 2% this year, 3% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0006 \times (t-1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places. %
Transcribed Image Text:The real risk-free rate is 4%. Inflation is expected to be 2% this year, 3% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0006 \times (t-1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places. %
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