The real risk-free rate is 2.25%. Inflation is expected to be 1.75% this year and 3.50% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield of 3-year Treasury securities?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 4P: Determinant of Interest Rates The real risk-free rate of interest is 4%. Inflation is expected to be...
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The real risk-free rate is 2.25%. Inflation is expected to be 1.75% this year and 3.50% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities?

What is the yield of 3-year Treasury securities? 

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