An investor in Treasury securities expects inflation to be 2.5% in Year 1, 3.4% in Year...

An investor in Treasury securities expects inflation to be 2.5% in Year 1, 3.4% in Year 2, and 4.35% each year thereafter. Assume that the real risk-free rate is 2.15% and that this rate will remain constant. Three-year Treasury securities yield 6.25%, while 5-year Treasury securities yield 8.15%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP₅ - MRP₃? Do not round intermediate calculations. Round your answer to two decimal places.

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jeff jeffy answered 6 months ago

An investor in Treasury securities expects in ation to be 2.5 % in Year 1, 3.2...

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Interest rates on 4-year Treasury securities are currently 6.4%, while 6-year Treasury securities yield 7.55%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

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