What is the maturity risk premium for three year security

Assignment Help Financial Management

Reference no: EM131500046

Assume that a 3-year Treasury security yields 3.70%. Also assume that the real risk-free rate (r*) is 0.75%, and Inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal interest rate also includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Your answer should be between 0.00 and 2.92, rounded to 2 decimal places, with no special characters.

Reference no: EM131500046

Questions Cloud

Will philip choose public housing or rent on private market : Philips demand curve for housing is shown in the following figure. (Assume that quantity of housing is measured simply by the number of square feet.

What is the percentage change in price of five year bond : What is the percentage change in the price of the 5-year bond since it was issued? The 10-year bond?

What would be the total return of the bond in dollars : A 6.85 percent coupon bond with 22 years left to maturity is priced to offer a 5.4 percent yield to maturity. What would be the total return of bond in dollars.

What are arithmetic and geometric returns for the stock : A stock has had returns of 16 percent, 13 percent, 6 percent, -14 percent, What are the arithmetic and geometric returns for the stock?

What is the maturity risk premium for three year security : What is the maturity risk premium for the 3-year security? Assume that a 3-year Treasury security yields 3.70%.

What method or methods of depreciation are used by apple : Using the notes to find financial statements, what method or methods of depreciation are used by Apple for financial reporting purposes?

Write a report on screening and treating potential clients : write a report on screening and treating potential clients for addictions.Research screening tools and therapeutic interventions .

What is a competitive advantage : What is a competitive advantage? Why is it important for a small business to establish one?

Sketch income-leisure budget constraint with provision : Food stamp benefits arc phased out in a complicated fashion that varies from state to state. However, at some point near the poverty Line, food stamps.

User Account

All Pages