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7. The real short-term risk-free rate is 1.5% and expected to stay constant. The inflation rate is expected to be 0.8% this year, 2% for
7. The real short-term risk-free rate is 1.5% and expected to stay constant. The inflation rate is expected to be 0.8% this year, 2% for each of the following 5 years, and 2.5% thereafter. The maturity risk premium is expected to be 0.0004 T, where T is the number of years to maturity. I YEAR TREASURY RISK matm vhtsmPREE PATE Pag a.What is the expected yield on a 1-year Treasury bill? 2o.8 t Cisk free rate + Inflation prenhm b.What is the expected yield on a 3-year Treasury note? 3 YEAR 2 .8% o, 2t 2 /3 IPL+ IP2+1 P3/N c. What is the expected yield on a 30-year Treasury bond? 12.5) 2.5 2t130 4./3 1.C 7
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