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    twilli15's Avatar
    twilli15 Posts: 2, Reputation: 1
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    #1

    Oct 3, 2009, 03:12 PM
    Determinant of interest rates
    If real risk-free rate is 4 percent. Inflation is expected to be 2 percent this year and 5 percent during the next 2 years. Assuming that the maturity risk premium is zero.

    What is the yield on 2-year v.s. 3-year Treasury securities?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Oct 4, 2009, 06:20 AM
    Use the Fisher relationship between the real rate r, the expected inflation rate i, and the nominal rate n...



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