What is mrp5 minus mrp2, If 2-year and 5-year Treasury

What is mrp5 minus mrp2

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Reference no: EM13265020

Assume that the real risk-free rate, r*, is 4% and that inflation is expected to be 7% in Year 1, 5% in Year 2, and 4% thereafter. Assume also that all Treasury securities are highly liquid and free of default risk. If 2-year and 5-year Treasury notes both yield 10%, what is the difference in the maturity risk premiums (MRPs) on the two notes; that is, what is MRP5 minus MRP2? Round your answer to two decimal places.

Reference no: EM13265020

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