Difference in the maturity risk premiums

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Reference no: EM131567913

An investor in Treasury securities expects inflation to be 1.95% in Year 1, 2.95% in Year 2, and 3.95% each year thereafter. Assume that the real risk-free rate is 2.25%, and that this rate will remain constant. Three-year Treasury securities yield 6.00%, while 5-year Treasury securities yield 7.50%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP3? Round your answer to two decimal places.

Reference no: EM131567913

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