The real risk-free rate is 3.5% and inflation is expected to be 2.25% for the next...

The real risk-free rate is 3.5% and inflation is expected to be 2.25% for the next 2 years. A 2-year Treasury security yields 6.95%.

What is the maturity risk premium for the 2-year security? Round your answer to one decimal place.

Expert Solution

Maturity risk premium = Treasury security yield - Real risk-free rate - Inflation

Maturity risk premium = 6.95% - 3.5% - 2.25%

Maturity risk premium = 1.20%

jeff jeffy answered 2 years ago

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