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Zanzabum
3 years ago
12

The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.2%.

What is the maturity risk premium for the 2-year security
Business
1 answer:
den301095 [7]3 years ago
4 0

Answer:

0.2%

Explanation:

The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years; so the risk-free rate is 6%.

The maturity risk premium is the different between return on investment and same tenor investment

= Treasury security yields 6.2% - risk free rate 6%

= 6.2% - 6% = 0.2%

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