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The 5-year T-Note yields 6% and the 10-year T-Note yields 7%. Economists predict that real rates and inflation will remain constant over the next ten
The 5-year T-Note yields 6% and the 10-year T-Note yields 7%. Economists predict that real rates and inflation will remain constant over the next ten years at 3% and 2%, respectively. What is the difference between maturity risk premium for the 10-year bond and the 5-year bond? Assume that neither bond's yield includes a liquidity risk premium.
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