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Assume that real risk-free rate = 3%. Inflation rate is expected to be 8% in year 1, 5% in year 2, and 4% thereafter. Also assume that all T-bonds are highly liquid and free of default risk. If 2-year T-bond yields 13%, what is the maturity risk premium?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M973966

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