Determine maturity risk premium for the two year security
The real risk free rate is 3 percent, and inflation is expected to be 3 percent for the next 2 years. A 2 year Treasury security yields 6.2 percent. What is the maturity risk premium for the 2 year security?
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The maturity risk premium is estimated to be 0.05*(t-1)%, where t = number of years to maturity. What is the yield on a 7 year Treasury note?
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