What is the interest rate on 1-year

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Suppose most investors expect the inflation rate to be 5% next year, 6% the following year, and 7% thereafter. The real risk-free rate is 3.5%. The maturity risk premium is zero for bonds that mature in 1 year or less, 0.3% for 2-year bonds, and then the MRP increases by 0.3% per year thereafter for 20 years, after which it is stable. What is the interest rate on 1-year, 9-year, and 18-year Treasury bonds? Percentage answers should be rounded to 2 decimal places (0.12%) while decimal answers are to be rounded to 4 decimal places (0.1234).

Reference no: EM133121555

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