The real risk-free rate is 1.85%. Inflation is expected to be 2.85% this year, 4.35% next...
The real risk-free rate is 1.85%. Inflation is expected to be 2.85% this year, 4.35% next year, and 2.3% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places.
Homework Answers
Yield on a 7-year Treasury note= real risk-free rate+ inflation premium+ maturity risk premium
= 1.85%+ (2.85%+4.35%+2.3%*5)/7 + 0.05*(7-1)%
= 1.85%+ 2.67%+0.3%
= 4.82%
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