Maturity risk premium on the six-year treasury security

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Reference no: EM131875576

1. If Siemens AG, a German company, pays down its accounts payable arising from a recent purchase of supplies in the U.S. by writing a check against its Deutsche Bank account in NYC to a U.S. supplier, it will be recorded in the Balance of Payment accounting system as a

A. A credit transaction in the current account

B. A debit transaction in the capital account

C. A credit transaction in the capital account

D. A debit transaction in the current account

2. Determinants of Interest Rate for Individual Securities The Wall Street Journal reports that the rate on 3-year Treasury securities is 6.20 percent, and the 6-year Treasury rate is 6.45 percent. From discussions with your broker, you have determined that expected inflation premium is 2.45 percent next year, 2.50 percent in Year 2, and 2.80 percent in Year 3 and beyond. Further, you expect that real interest rates will be 3.30 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security?

.70%

.10%

.65%

.35%

Reference no: EM131875576

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