2. Interest rates A two-year Treasury security currently earns 5.25 percent. Over the next two years, the real interest rate is expected to be 3.00 percent per year and the inflation premium is expected to be 2.00 percent per year. What is the maturity risk premium on the two-year Treasury security?

Answer 1

if you invest twice as much in a term deposit that pays 3% annuual interest than you do in a money market that pays 2% annual interest, how much do you have in each account in order to earn $20 of interest in one year?