1. The real risk rate is 3.5% and inflation to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then increase by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further).

What is the inflation premium for a 12 year bond?

Answers should be given as a percentage rounded to 2 decimal places.

Hint: The inflation premium is the average of the expected inflation rates for the required number of years.

2. The real risk rate is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature 1 year or less, 0.3% for 2-year bonds, and then increases by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further).

What is the inflation premium for a 7-year bond?

Answers should be given as a percentage rounded to 2 decimal places.

Hint: The inflation premium is the average of the expected inflation rates for the required number of years.

3. The real risk free is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature 1 year or less, 0.3% for 2-year bonds, and then increase by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further)

What is inflation premium for a 5 year bond?

Answers should be given as a percentage rounded to 2 decimal places

Hint: the inflation premium is the average of the expected inflation rates for the required number years.

4. The real risk rate 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then increase by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further)

What is the maturity risk premium for a 12 year?

Answer should be given as a percentage rounded to 1 decimal place.

Hint: Only sum for the years after the first year?

5. The real risk free is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2 year bonds, and then increase by 0.3% per year thereafter for years, after which it is stable (does not increase any further)

What is the maturity risk premium for a 40-year bond?

Please to Show Detailed WORKINGS