Question: Assume that return rate on TIP = 3%. Inflation rate is expected to be 7% in year 1,5% in year 2, and 4% thereafter. Also

Assume that return rate on TIP = 3%. Inflation rate is expected to be 7% in year 1,5% in year 2, and 4% thereafter. Also assume that all T-bonds are highly liquid and free of default risk. If 2-year T-bond yields 12%, what is the maturity risk premium? Select one O a 1.0% Ob. 3.0% Oc2.5% Od 3.5% . 1.596

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