2.

2A) The real risk-free rate is 2.5% and inflation is expected to be 3.25% for the next 2 years. A 2-year Treasury security yields 6.85%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place.

2B) One-year Treasury securities yield 2.65%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 2.9%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.