Save Submit Assignment for Grading Questions Problem 5-06 (Maturity Risk Premium) Question 3 of 9 Check...

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Save Submit Assignment for Grading Questions Problem 5-06 (Maturity Risk Premium) Question 3 of 9 Check My Work 2 0 3. O eBoo

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Answer 1

Answer #1

Real Risk-free Rate = 2.00%
Inflation Premium = 4.00%
Yield on 2-year Treasury Security = 6.80%

Yield on 2-year Treasury Security = Real Risk-free Rate + Inflation Premium + Maturity Risk Premium
6.80% = 2.00% + 4.00% + Maturity Risk Premium
6.80% = 6.00% + Maturity Risk Premium
Maturity Risk Premium = 0.80%

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Answer 2

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