The maturity risk premium is estimated to be 00005 x t-1


The real risk-free rate is 2%. Inflation is expected to be 3% this year, 4% next year and then 3.5% thereafter. The maturity risk premium is estimated to be 0.0005 x (t-1), where t = number of years to maturity. What is the nominal interest rate on a 7 year Treasury security?

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: The maturity risk premium is estimated to be 00005 x t-1
Reference No:- TGS0641234

Expected delivery within 24 Hours