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A 5-year Treasury bond has a 3.39% yield. A 10-year Treasury bond yields 6.05%, and a 10-year corporate bond yields 8.6%. The market expects that

A 5-year Treasury bond has a 3.39% yield. A 10-year Treasury bond yields 6.05%, and a 10-year corporate bond yields 8.6%. The market expects that inflation will average 2.85% over the next 10 years. Assume that there is no maturity risk premium and that the annual real risk-free rate will remain constant over the next 10 years. A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described. What is the yield on this 5-year corporate bond?

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