The real risk-free rate is 4%, and the annual inflation rate is expected to be 2% next year, 3% in year two, and 5% in year three. Three-year Treasury securities yield 10%. What is the maturity risk premium for a 3-year treasury?
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
The real risk-free rate is 4%, and the annual inflation rate is expected to be 2% next year, 3% in year two, and 5% in year three. Three-year Treasury securities yield 10%. What is the maturity risk premium for a 3-year treasury?
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