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6. An analyst evaluating securities has obtained the following information. The real rate of interest is 4%. The rate is expected to remain constant for

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6. An analyst evaluating securities has obtained the following information. The real rate of interest is 4%. The rate is expected to remain constant for the next 3 years. Inflation is expected to be 3% next year, 5% the following year, and 3% the third year. The maturity risk premium is estimated to be 0.1(t1)%, where t= number of years to maturity. The liquidity premium on relevant 3-year securities is 0.50% and the default risk premium on relevant 3-year securities is 1.8%. Compute the yield on a 3-year corporate bond. (10 points) r=r+IP+LP+DRP+MRP

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