The Wall Street Journal Reports That the Rate on Three-Year

The Wall Street Journal reports that the rate on three-year Treasury securities is 6.50 percent, and the six-year Treasury rate is 6.80 percent. From discussions with your broker, you have determined that expected inflation premium is 2.25 percent next year, 2.50 percent in Year 2, and 2.60 percent in Year 3 and beyond. Further, you expect that real interest rates will be 3.4 percent annually for the foreseeable future. Calculate the maturity risk premium on the three-year and the six-year Treasury security.

A) 3-year: 0.6 percent; 6-year: 0.80 percent
B) 3-year: 0.5 percent; 6-year: 0.90 percent
C) 3-year: 0.6 percent; 6-year: 1.20 percent
D) 3-year: 0.5 percent; 6-year: 0.80 percent