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An investor in Treasury securities expects in ation to be 2.5 % in Year 1, 3.2 % in Year 2, and 3.6 % each year
An investor in Treasury securities expects in ation to be 2.5 % in Year 1, 3.2 % in Year 2, and 3.6 % each year thereafter. Assume that the real risk free rate is 2.75 % and that this rate will remain constant. Three-year treasury securities yield 6.25 %, while 5-year Treasury securities yield 6.8 %. What is the dierence in the maturity risk premiums (MRPs) on the two securities; that is MRP5 MRP2
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