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What is the maturity risk premium for the two-year security

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You are currently investing your money in a bank account which has a nominal annual rate of 8 percent, compounded annually. If you invest $2,000 today, how many years will it take for your account to grow to $10,000?

The real risk-free rate is 2.75%, and inflation is expected to be 4% for the next 2 years. A 2-year Treasury security yields 8.5%. What is the maturity risk premium for the 2-year security?

Reference no: EM131345328

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