18.Given the following data, find the expected rate of inflation during the next year.

k* = real risk-free rate = 3%.

Maturity risk premium on 10-year T-bonds = 2%.It is zero on 1-year bonds, and a linear relationship exists.

Default risk premium on 10-year, A-rated bonds = 1.5%.

Liquidity premium = 0%.

Going interest rate on 1-year T-bonds = 8.5%.

 

29.Consider a $1,000 par value bond with a 7 percent annual coupon.The bond pays interest annually.There are 9 years remaining until maturity.What is the current yield on the bond assuming that the required return on the bond is 10 percent?