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...

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.