A two-year Treasury security currently earns 1.94%. Over the next two years, the real risk-free rate is expected to be 1.00% per year and the inflation premium is expected to be 0.50% per year. Calculate the maturity risk premium on the two-year. wer:

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.