Suppose we have a new company by the name of Voice River, Inc., which provides media-on-demand services via the Internet. Management has been studying current interest rates. A commercial bank is willing to make a two-year loan to Voice River at a 12 percent annual interest rate or a 13.25% on a 5-year loan. The U.S. government is currently paying 8 percent annual interest on its two-year securities. The company prefers a 2-year loan.

1. What is the maturity risk premium comparing the 2-year with the 5-year bank loans.