The real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years. A 2-year Treasury security yields 7.6%. What is the maturity risk premium for the 2-year security?
Yield = Real risk free rate * Inflation rate + Risk premium
7.6% = (3% * 1.02 ) + Risk Premium
therefore ,
Risk Premium = 4.54%
The real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years. A 2-year Treasury security yield...
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