Find what is maturity risk premium for the two-year security

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Problem 1: Assume that the 3-month Treasury bill (real risk-free rate) is at 2.25% and inflation is expected to be 2.85% for the next 2 years. A 2-year Treasury security yields 5.75%. What is the maturity risk premium for the 2-year security?

Group of answer choices

Option 1: .60%

Option 2: .65%

Option 3: 2.15%

Option 4: 2.90%

Option 5: 3.50%

Reference no: EM133012407

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