A 2-year Treasury security currently earns 5.13%. Over the next 2 years, the real interest rate is expected to be 2.15% per year and the inflation premium is expected to be 1.75% per year. Calculate the maturity risk premium on the 2-year Treasury security.
A) 5.13%
B) 3.38%
C) 2.98%
D) 1.23%
Correct Answer:
Verified
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