I am trying to understand how to resolve the following question: The real risk-free rate is 2%, and inflation is expected to be 2% for the next 2 years. A 2-year Treasury security yields 8.4%. What is the maturity risk premium for the 2-year security? I can seem to find a formula or any clues on how to approach it.
I am trying to understand how to resolve the following question:
The real risk-free rate is
2%, and inflation is expected to be 2% for the next 2 years. A 2-year Treasury security yields 8.4%. What is the maturity risk premium for the 2-year security?
I can seem to find a formula or any clues on how to approach it.
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