The Wall Street Journal reports that the rate on three-year Treasury securities is 7.00 percent, and the six-year Treasury rate is 6.20 percent. From discussions with your broker, you have determined that the expected inflation premium will be 2.25 percent next year, 2.50 percent in year 2, and 2.50 percent in year 3 and beyond. Further, you expect that real interest rates will be 4.4 percent annually for the foreseeable future. Calculate the maturity risk premium on the 3-year Treasury security.

Maturity risk for 3 year Treasury security is 0.1%

Explanation:

Given -

Rate of 3 year Treasury security, R3 = 7%

Rate of 6 year Treasury security, R6 = 6.2%

Rate of inflation, Ri = 2.25% next year, 2.5% on 2nd year, 2.5% on 3rd year

Real interest rate, Rint = 4.4%

Maturity risk on 3 year Treasury security, x = ?

Maturity risk for 3 year Treasury security:

R3 = Ri on 3rd year + Rint + x

7% = 2.5% + 4.4% + x

x = 0.1%

Therefore, Maturity risk for 3 year Treasury security is 0.1%

step-by-step explanation :

we know that

the measurement of the outer angle is the semi-difference of the arcs which comprises

in this problem

m< xzy is the outer angle

substitute the values

the measure of angle xoy is equal to

> by central angle

substitute the value

this may not be at all, but i use the same website you're using for school, and if i'm stuck doing one of these i try to look for it on the section.