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2-The real interest rate is 0.8%, inflation is expected to be 1.5% for this year and the next n=6 years. The maturity risk premium is
2-The real interest rate is 0.8%, inflation is expected to be 1.5% for this year and the next n=6 years. The maturity risk premium is given by MRP = 0.05*(n-1)%. What is the rate on a n=6-Treasury?
3-Given a real interest rate of 1.24% and expected rates of inflation in the first, second, and third years of 1.44%, 1.25%, 1.43%, respectively, what rate of return would you expect to earn on a 3-year T-bond assuming a maturity risk premium of 0.69%? (Answer is in %)
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