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Interest Rates a 2-Year Treasury Security Currently Earns 5

Question 7

Multiple Choice

Interest rates A 2-year Treasury security currently earns 5.25 percent. Over the next two years, the real interest rate is expected to be 3.00 percent per year and the inflation premium is expected to be 2.00 percent per year. What is the maturity risk premium on the 2-year Treasury security?


A) 0.25%
B) 1.00%
C) 1.05%
D) 5.00%

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