ZuoTi.Pro
Question

tegrity standards. Question 1 5 pts Assume that a 3-year Treasury security yields 5.10%. Also assume that the real risk-free
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Yield on 3-year Treasury Security = 5.10%
Real Risk-free Rate = 0.75%
Inflation Premium = 2.25%

Yield on 3-year Treasury Security = Real Risk-free Rate + Inflation Premium + Maturity Risk Premium
5.10% = 0.75% + 2.25% + Maturity Risk Premium
5.10% = 3.00% + Maturity Risk Premium
Maturity Risk Premium = 2.10%

So, maturity risk premium for the 3-year security is 2.10%

1 0
Add a comment
Know the answer?
Add Answer to:
tegrity standards. Question 1 5 pts Assume that a 3-year Treasury security yields 5.10%. Also assume...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 5 pts Assume that a 3-year Treasury security yields 3.70%. Also assume that the real risk-free...

    5 pts Assume that a 3-year Treasury security yields 3.70%. Also assume that the real risk-free rate (r") is 0.75%, and inflation is expected to be 2 25% annually for the next years. In addition to inflation, the nominal interest rate also includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the Star security? Round your answer to two decimal places. Your answer should be between 0.00 and 2.92, rounded to...

  • Assume that a 3-year Treasury security yields 5.20%. Also assume that the real risk-free rate (r')...

    Assume that a 3-year Treasury security yields 5.20%. Also assume that the real risk-free rate (r') is 0.75%, and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal interest rate also includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round your answer to two decimal places. 5 pts Your answer should be between 0.00 and 2.92 rounded to...

  • D Question 1 5 pts Assume that a 3-year Treasury security yields 5.00%. Also assume that...

    D Question 1 5 pts Assume that a 3-year Treasury security yields 5.00%. Also assume that the real risk-free rate rs 0.75%, and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal interest rate also includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round your answer to two decimal places Your answer should be between 0.00 and 2.92,...

  • 1) Assume that a 3-year treasury security yields 4.10%. Also assume that the real risk-free rate...

    1) Assume that a 3-year treasury security yields 4.10%. Also assume that the real risk-free rate (r*) is 0.75% and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal insterest rate includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round answer to two decimal places. 2) a treasury bond that matures in 10 years has a yield of...

  • A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.1%, and a...

    A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.1%, and a 10-year corporate bond yields 9.4%. The market expects that inflation will average 2.9% over the next 10 years (IP10 = 2.9%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...

  • A 5-year Treasury bond has a 3.75% yield. A 10-year Treasury bond yields 6.15%, and a...

    A 5-year Treasury bond has a 3.75% yield. A 10-year Treasury bond yields 6.15%, and a 10-year corporate bond yields 8.55%. The market expects that inflation will average 3.9% over the next 10 years (IP10 = 3.9%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...

  • A 5-year Treasury bond has a 4.35% yield. A 10-year Treasury bond yields 6.65%, and a...

    A 5-year Treasury bond has a 4.35% yield. A 10-year Treasury bond yields 6.65%, and a 10-year corporate bond yields 8.65%. The market expects that inflation will average 2.7% over the next 10 years (IP10 = 2.7%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...

  • 18.  Problem 6.17 INTEREST RATE PREMIUMS A 5-year Treasury bond has a 3.35% yield. A 10-year Treasury...

    18.  Problem 6.17 INTEREST RATE PREMIUMS A 5-year Treasury bond has a 3.35% yield. A 10-year Treasury bond yields 6.25%, and a 10-year corporate bond yields 9.55%. The market expects that inflation will average 3.15% over the next 10 years (IP10 = 3.15%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium...

  • Suppose the inflation rate is expected to be 2% next year, 3% the following year, and...

    Suppose the inflation rate is expected to be 2% next year, 3% the following year, and 5% thereafter. Assume that the real risk free rate will remain constant at 1% and that MRP = (0.25x(t-1))% where t is the number of years to maturity. The default risk premium on 5 year corporate bonds is 0.75% and the liquidity premium on 5 year corporate bonds is 0.25%. a. Calculate the interest rate on a 5 year treasury security. b. Calculate the...

  • D Question 4 5 pts Sandino Corporation's 10 year, semiannual bond is currently selling at $850,...

    D Question 4 5 pts Sandino Corporation's 10 year, semiannual bond is currently selling at $850, with a coupon rate of 5% and a nominal rate (YTM) of 7.12%. Given an annual maturity risk premium (MRP) of (t-1)*0.10%, the bond's liquidity premium (LP) of 0.40% and default risk premium (DRP) of 3.55%, what is the risk-free (TRF) rate? Your answer should be between 1.80 and 3.58, rounded to 2 decimal places, with no special characters. Question 5 5 pts Suppose...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT