The 5-Year T-Note Yields 6% and the 10-Year T-Note Yields

question 79

Multiple Choice

The 5-year T-Note yields 6% and the 10-year T-Note yields 7%.Economists predict that real rates and inflation will remain constant over the next ten years at 3% and 2%,respectively.What is the difference between maturity risk premium for the 10-year bond and the 5-year bond? Assume that neither bond's yield includes a liquidity risk premium.

• A) 0.94%
• B) 1.00%
• C) 1.94%
• D) 2.00%
• E) 3.00%

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Definitions:

Respiratory Pigment

Substances found in various organisms that facilitate the transfer of oxygen from the environment to the organism's cells, such as hemoglobin in humans.

Reptiles

Cold-blooded vertebrates that have scales, breathe air, and lay eggs, including snakes, lizards, crocodiles, and turtles.

Bohr Effect

A physiological phenomenon where decreases in blood pH or increases in carbon dioxide concentration lead to a reduction in the affinity of hemoglobin for oxygen.

Oxygen-Hemoglobin Dissociation

The process by which oxygen binds to hemoglobin in the lungs and is released to tissues, influenced by factors like pH and temperature.