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photoshop1234 [79]
3 years ago
10

A two-year Treasury security currently earns 5.25 percent. Over the next two years, the real interest rate is expected to be 3.0

0 percent per year and the inflation premium is expected to be 2.00 percent per year. What is the maturity risk premium on the two-year Treasury security?
Business
1 answer:
neonofarm [45]3 years ago
5 0

Answer:

The maturity risk premium on the two-year Treasury security is 0.25%

Explanation:

The computation of the maturity risk premium is shown below:

= Currently earning - expected real interest rate - expected inflation premium

= 5.25% - 3% - 2%

= 0.25%

For computing the maturity risk premium we deducted the real interest rate and inflation premium from the currently earning so that actual value can come.

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