You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

• Inflation premium = 3.00%
• Liquidity premium = 0.6%
• Maturity risk premium = 2.00%
• Default risk premium = 2.00%

On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.

The real risk-free rate is 2.25%. Inflation is expected to be 2.50% this year and 5.00% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places.

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What is the yield on 3-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places.

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