The Wall Street Journal reports that the rate on three-year Treasury securities is 7.00 percent, and the six-year Treasury rate is 6.20 percent. From discussions with your broker, you have determined that the expected inflation premium will be 2.25 percent next year, 2.50 percent in year 2, and 2.50 percent in year 3 and beyond. Further, you expect that real interest rates will be 4.4 percent annually for the foreseeable future.

Calculate the maturity risk premium on the 3-year Treasury security.  

Answer rating: 100% (QA)

To calculate the maturity risk premium on the 3year Treasury security we need to consider the compon... View the full answer