Suppose the in flation rate is expected to be 7% next year, 5% the following year, and 3% thereafter. Assume that the real risk-free rate, will…

Suppose the inflation rate is expected to be 7% next year, 5% the following year, and 3% thereafter. Assume that the real risk-free rate, will remain at 2% and that maturity risk premium on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premium increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-years or longer term T-bonds. 

a. Calculate the average expected inflation rate for 1-, 2-, 3-, 4-, 5- and 10- year treasury securities. 

b. Calculate the maturity risk premium for 1-, 2-, 3-, 4-, 5- and 10- years Treasury securities. 

c. Calculate the interest rate on 1-, 2-, 3-, 4-, 5-, and 10- year treasury securities.