Question: 1 . A two - year Treasury security currently earns 1 . 9 4 percent. Over the next two years, the real risk - free

1. A two-year Treasury security currently earns 1.94 percent. Over the next two years, the real risk-free rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.50 percent per year. Calculate the maturity risk premium on the two-year Treasury security. (LG 2-6)

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