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Determine the inflation premium on the treasury bill

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Reference no: EM133071030

Question - Assume that the interest rate on a one-year Treasury bill is 4.0 percent and the rate on a two-year Treasury note is 8.3 percent.

A. If the expected real rate of interest is 2.7 percent, determine the inflation premium on the Treasury bill.

B. Using the expected real rate of interest from Part A, if the maturity risk premium is expected to be zero, determine the inflation premium on the Treasury note.

Reference no: EM133071030

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