The real risk free rate is 3.5% and inflation is project to be 5% next year,...

  

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The real risk free rate is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then increases by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further). What is the maturity risk premium for a 12-year bond? Answers should be given as a percentage rounded to 1 decimal place (Example X.X%) Hint: Only sum for the years after the first year Answer: The real risk free rate is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then increases by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further). What is the inflation premium for a 7-year bond? Answers should be given as a percentage rounded to 2 decimal places (Example X.XX%) The real risk free rate is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then increases by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further). What is the maturity risk premium for a 12-year bond? Answers should be given as a percentage rounded to 1 decimal place (Example X.X%) Hint: Only sum for the years after the first year Answer: The real risk free rate is 3.5% and inflation is project to be 5% next year, 6% the following year, and 7% thereafter. The maturity risk premium of zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then increases by 0.3% per year thereafter for 20 years, after which it is stable (does not increase any further). What is the inflation premium for a 7-year bond? Answers should be given as a percentage rounded to 2 decimal places (Example X.XX%)

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To calculate the maturity risk premium for a 12year bond we need to sum the incremental increases in ... View the full answer