Question
8-Suppose that the yield on a Treasury is 2 percent, the yield on a 2year Treasury is 4 percent, and the yield on a 3year
8-Suppose that the yield on a Treasury is 2 percent, the yield on a 2year Treasury is 4 percent, and the yield on a 3year Treasury is 6 percent . The real rate is a constant 2 percent per year and MRP = 0 Calculate the expected interest rate on year Treasury security one year from now 9-Suppose that the real risk- free rate is a constant 2 percent per year and investors demand matunty risk premium equal to MRP=[0,18]\% where the number of years to maturity Also suppose that inflation is expected to be 10% in year 1, 20% in year 2and 30 per year thereafter The liquidity premium on all corporate bonds is and the default risk premium on BBB rated bonds is 0.2% Calculate the yield on a 3 year BBB Corporate bond ?
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