The real risk-free rate is 3.0% and inflation is expected to be 2.25% for the next...

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The real risk-free rate is 3.0% and inflation is expected to be 2.25% for the next...

The real risk-free rate is 3.0% and inflation is expected to be 2.25% for the next 2 years. A 2-year Treasury security yields 6.05%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place.

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Answer 1

Answer #1

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

Maturity risk premium = 6.05% - 3.0% - 2.25%

Maturity risk premium = 0.8%

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Answer 2

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