p8 4 thirty year us treasury bond has 40 percent interest rate contrast ten year treasury bo
P8-4. A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In
contrast, a ten-year Treasury bond has an interest rate of 3.7 percent.
If inflation is expected to average 1.5 percentage points over both the
next ten years and thirty years, determine the maturity risk premium
for the thirty-year bond over the ten-year bond.