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A thirty-year U.S. Treasury bond has a 4.0 percent...

Description

Solution


Question

A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury bond has an interest rate of 3.7 percent. If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine the maturity risk premium for the thirty-year bond over the ten-year bond. Please show the formula used.

 

Paper#11905 | Written in 18-Jul-2015

Price : $25
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