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U.S. Treasury bond data shows the following information: Inflation next year is estimated to be 5%, 3% the following year, and 1% thereafter. The real

  1. U.S. Treasury bond data shows the following information: Inflation next year is estimated to be 5%, 3% the following year, and 1% thereafter. The real risk-free rate will remain at 3% and the maturity risk premium starts at 0.2% for a 1-year bond and increases by 0.2% for each year after that up to a maximum of 1%.
    1. Calculate the interest rates for a 1-, 2-, 3-, 4-, 5-, and 10-year Treasury securities.
    2. Plot a yield curve for the Treasury securities.
    3. Plot an estimated yield curve for a AA-rated company on the same curve.
    4. What economic information could be taken from this graph?

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