Maturity Risk Premium
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 8.5%. What is the maturity risk premium for the 2-year security? Round your answer to two decimal places.
_________ %
Expected Interest Rate
The real risk-free rate is 3.5%. Inflation is expected to be 2.25% this year and 4.25% during the next 2 years. Assume that the maturity risk premium is zero.
What is the yield on 2-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places.
_________%
What is the yield on 3-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places.
___________%