Determinants of Interest Rates The real risk-free rate is 24. Inflation is expected to be 3% this year, 4% next year, and then o% thereafter. The maturity risk premium is estimated to be 0.0003 * (- 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places. Maturity Risk Premium Assume that the real risk-free rate, r', is 2% and that inflation is expected to be 5% in Year 1,6% in Year 2, and 4% thereafter. Assume also that all Treasury securities are highly liquid and free of default risk. Df 2-year and 5-year Treasury notes both yield 10%, what is the difference in the maturity risk premiums (MRP) on the two notes; that is what is MRP, minus MRP2? Round your answer to two decimal places. Determinants of Interest Rates Suppose you and most other investors expect the inflation rate to be 6% next year, to fall to 4% during the following year, and then to remain at a rate of thereafter. Assume that the real risk-free rate, r", will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on wry short-term securities (those that mature in a few days) to a level of 0.2 percentage points for 1-year securities. Furthermore, maturity risk premiums increase 0.2 percentage points for each year to maturity, up to a limit of 1.0 percentage point on 5-year or longer-term T-notes and T-bonds. a. Calculate the interest rate on 1., 2.,3.,4.,5., 10, and 20-year Treasury securities. Round your answer to two decimal places. Years to Maturity Interest rate 2 3 5 10 20 Oxcurity Risk Premiums Lissume that the real risk-free rate, r", is 2% and that inflation is expected to be 8% in Year 1,6% in Year 2, and 4% thereafter. Assume also that all Treasury securities are highly liquid and free of default risk. IY 2-year and S-year Treasury Ates both yield 10%, what is the difference in the maturity risk premiums (MRP) on the two notes; that is, what is MRPminus MRP27 Round your answer to two decimal places