What is the difference in the maturityr risk premiums

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Question 1: An investor in Treasury securities expects inflation to be 2.3% in Year 1, 2.8% in Year 2, and 3.15% each year thereafter. Assume that the real risk-free rate is 1.35% and that this rate will remain constant. Three-year Treasury securities yield 5.4?%, while 5-year Treasury securities yield 100%. What is the difference in the maturityr risk premiums {MRPs} on the two securities: that is, what is MRP5 - MRP3? Do not round intermediate calculations. Round your answer to two decimal places.

Question 2: Interest rates on 4-year Treasury securities are currentlyr 6.4%, while 6-year Treasury securities yield 8.05%. If the pure expectations theory is correct. what does the market believe that 2-year securities will he yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM132485242

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