The Wall Street Journal reports that the rate on three$-$year Treasury securities is $6\mathrm{.}50$ percent, and the six$-$year Treasury rate is $6\mathrm{.}80$ percent. From discussions with your broker, you have determined that the expected inflation premium will $2\mathrm{.}25$ percent next year, $2\mathrm{.}50$ percent in year $2,$ and $2\mathrm{.}60$ percent in year $3$ and beyond. Further, you expect that real interest rates will be $3\mathrm{.}4$ percent annually for the foreseeable future. Calculate the maturity risk premium on the three$-$year and the six$-$year Treasury security.

Multiple Choice

$3-$year: $0\mathrm{.}6$ percent, $6-$year: $1\mathrm{.}20$ percent

$3-$year: $0\mathrm{.}5$ percent, $6-$year: $0\mathrm{.}90$ percent

$3-$year: $0\mathrm{.}5$ percent, $6-$year: $0\mathrm{.}80$ percent

$3-$year: $0\mathrm{.}6$ percent, $6-$year: $0\mathrm{.}80$ percent