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ivanzaharov [21]
3 years ago
10

A two-year Treasury security currently earns 5.13 percent. Over the next two years, the real interest rate is expected to be 2.1

5 percent per year and the inflation premium is expected to be 1.75 percent per year. Calculate the maturity risk premium on the two-year Treasury security.
Business
1 answer:
pshichka [43]3 years ago
8 0

Answer:

maturity risk premium = 1.23 %

Explanation:

given data

currently earns =  5.13 %

real interest rate = 2.15 %

inflation premium = 1.75 %

solution

we get here maturity risk premium that is express as

maturity risk premium = currently earning -  real interest rate - inflation premium    .................1

put here value and we get

maturity risk premium = 5.13 % - 2.15 %  - 1.75 %

maturity risk premium = 1.23 %

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