Interest Rates a 2-Year Treasury Security Currently Earns 5

question 7

Multiple Choice

Interest rates A 2-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 2-year Treasury security?

• A) 0.25%
• B) 1.00%
• C) 1.05%
• D) 5.00%

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Definitions:

Inventory Levels

The quantity of goods or materials on hand at any given time, a crucial component in supply chain and inventory management.

Aggregate Planning

A marketing activity that attempts to balance supply and demand by determining the best level of production for a given time period.

Overtime

The extra time worked beyond the normal working hours, usually compensated at a higher pay rate.

Stockouts

Situations where demand cannot be met due to inadequate inventory, leading to missed sales opportunities and potentially dissatisfied customers.