Wall Street Journal Reports Rate 3 Year Treasury Securities 900 Percent 6 Year Treasury Ra Q17787514

The Wall Street Journal reports that the rate on 3-year Treasurysecurities is 9.00 percent, and the 6-year Treasury rate is 9.45percent. From discussions with your broker, you have determinedthat expected inflation premium is 3.85 percent next year, 3.20percent in Year 2, and 4.20 percent in Year 3 and beyond. Further,you expect that real interest rates will be 4.25 percent annuallyfor the foreseeable future. What is the maturity risk premium onthe 6-year Treasury security?

1%

2%

1.35%

or .55

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