The inflation premium is 2%.
The inflation premium is a component of a required return that compensates for inflation risk. It is the portion of the interest rate that investors demand in addition to the real risk-free rate due to the risk of a decline in the purchasing power of money. Inflation erodes the purchasing power of money over time. This is a major concern for investors who have money invested in bonds for years. The inflation premium is the yield needed to compensate for the expected inflation rate. Based on market interest rates, you can estimate the inflation premium. Inflation premiums are only indicators of inflation expectations. There is no way to predict actual future interest rates, especially over several years.
Learn more about inflation premium here-
https://brainly.com/question/20347726
#SPJ4
