The difference in the maturity risk premium pf two bonds

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Reference no: EM132069964

The real risk-free rate is 2%. The inflation rate is expected to be 3% a year for me next three years and then 4% a year thereafter. Assume that the default risk and liquidity premiums on all Treasury securities equal zero. You observe that 10-year.

Treasury bonds yield 1 % more than the yield on 5-year Treasury bonds. What is the difference in the maturity risk premium on the two bonds?

Reference no: EM132069964

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