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Assume that a 3-year Treasury security yields 3.50%. Also assume that the real risk-free rate is 0.75% and inflation is expected to be 2.25% annually
Assume that a 3-year Treasury security yields 3.50%. Also assume that the real risk-free rate is 0.75% and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal interest rate also includes a maturity risk premium that reflects interest rate risk. What is the maturity risk premium for the 3-year security?
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