Maturity risk premium: Premium required for accepting the risk on the specific security. Calculate the maturity risk premium as follows: Maturity risk premium = Ten year bond yield − Three year bond yield Difference in years Given nine months Treasury bill yield is 2.3%. Yield on three years bond is 2.9% and yield on years bonds yield is 4.3%. Bonds does not have liquidity premium.

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Chapter 5, Problem 17PROB

Summary Introduction

Maturity risk premium:

Premium required for accepting the risk on the specific security.

Calculate the maturity risk premium as follows:

Maturity risk premium=Ten year bond yield−Three year bond yieldDifference in years

Given nine months Treasury bill yield is 2.3%. Yield on three years bond is 2.9% and yield on years bonds yield is 4.3%. Bonds does not have liquidity premium.

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