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Business, 22.03.2021 19:40 omoaye

Suppose most investors expect the rate of inflation to be 2 percent next year, 4 percent the following year, and 3 percent thereafter. The real risk-free rate is 3 percent. The maturity risk premium is zero for bonds that mature in one year or less, 0.1 percent for two-year bonds; the MRP increases by 0.1 percent per year thereafter for 20 years, then becomes stable. What is the interest rate on one-year, 10-year, and 20-year Treasury bonds

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