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The real risk-free rate of interest is 1.22% at the beginning of 2021. Inflation is expected to be 2% in 2021, jump to 4.00% in
The real risk-free rate of interest is 1.22% at the beginning of 2021. Inflation is expected to be 2% in 2021, jump to 4.00% in 2022, and run at 3% in 2023. A maturity risk premium is expected to be 0.26% per year to maturity. A liquidity premium on corporate bonds issued by small companies will continue to be 0.50%, regardless of their maturities. What should the interest rate on a 3-year Treasury security be at the beginning of 2021?
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5.26%
4.74%
5.50%
4.89%
5.00%
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