What is the difference in the mrps on the two securities

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Problem: An investor in Treasury securities expects inflation to be 1.6% in Year 1, 2.2% in Year 2, and 3.45% each year thereafter. Assume that the real risk-free rate is 1.85% and that this rate will remain constant. Three-year Treasury securities yield 6.40%, while 5-year Treasury securities yield 8.00%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP3? Do not round intermediate calculations.

Reference no: EM133665235

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