Maturity risk premium an investor in treasury securities, Ask an Expert

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MATURITY RISK PREMIUM An investor in Treasury securities expects inflation to be 2.15% in Year 1, 3.1% in Year 2, and 3.9% each year thereafter. Assume that the real risk-free rate is 1.55% and that this rate will remain constant. Three-year Treasury securities yield 6.35%, while 5-year Treasury securities yield 7.15%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP3? Do not round intermediate calculations. Round your answer to two decimal places.

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