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10. Calculate the required rate of return on a AAA rated corporate bond with five years to maturity if a Treasury bond with five years
10. Calculate the required rate of return on a AAA rated corporate bond with five years to maturity if a Treasury bond with five years to maturity offers a rate of 2.5%. Five-year bonds carry maturity premium of 0.5%. The corporate bonds do not trade actively in the secondary market, requiring an extra compensation of 1%. AAA rated bonds offer a compensation of 3% for the possibility of bankruptcy.
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