5. Problem 6.12 (Maturity Risk Premium)

An investor in Treasury securities expects inflation to be 2.5% in Year 1, 3.2% in Year 2, and 4.15% each year thereafter. Assume that the real risk-free rate is 2.45% and that this rate will remain constant. Three-year Treasury securities yield 6.40%, while 5-year Treasury securities yield 8.00%. What is the difference in the maturity risk premiums (MRPS) on the two securities; that is, what is MRP5 - MRP3? Do not round intermediate calculations. Round your answer to two decimal places. %

An investor in Treasury securities expects inflation to be 2.5% in Year 1,3.2% in Year 2 , and 4.15% each year thereafter. Assume that the real risk-free rate is 2.45% and that this rate will remain constant. Three-year Treasury securities yield 6.40%, while 5 -year Treasury securities yield 8.00%. What is the difference in the maturity nisk premiums (MRPs) on the two securities; that is, what is MRPs . MRP, Do not round intermediate calculations. Round your answer to two decimal places