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17. Problem 6.17 (Interest Rate Premiums) ebook AS-year Treasury bond has a 4.9% yield. A 10-year Treasury bond yields 7.0%, and a 10-year corporate bond

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17. Problem 6.17 (Interest Rate Premiums) ebook AS-year Treasury bond has a 4.9% yield. A 10-year Treasury bond yields 7.0%, and a 10-year corporate bond yields 8.3%. The market expects that inflation will average 2.7% over the next 10 years (IP: -2.7%). Assume that there is no maturity risk premium (MRP - 0) and that the annual real risk-free rate, r, will remain constant over the next 10 years (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP = -0.) A 5-year corporate bond has the same default risk premium and Iquidity premium as the 10-year corporate bond described. What is the yield on this 5-year corporate bond? Round your answer to one decimal place. 90

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