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An analyst evaluating securities has obtained the following information. The real rate of interest is 2.4% and is expected to remain constant for the next
An analyst evaluating securities has obtained the following information. The real rate of interest is 2.4% and is expected to remain constant for the next 5 years. Intiation is expected to be 2.3% next year, 3.3% the following year, 4.3% the third year, and 5.3% every year thereafter. The maturity risk premium is estimated to be 0.1 * (t - 19%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the default riske premium on relevant 5-year securities is 1% a. What is the yield on a 1-year T-bill? Round your answer to one decimal place Hide Feedback Incorrect Check My Work Feedback Review the individual components that determine the market interest rate. A- 6 Determine the components that are relevant for calculating the short-term T-bil yield, Calculate the relevant inflation premium to use in the short-term T-bill yield Realize that the formula given for the MRP will be zero for the short-term T- Rablice that the short-term T-bill yield does not include a default or liquidity risk premium b. What is the yield on a 5-year T-bond Round your answer to one decimal place X ide Feedback c. What is the yield on a 5-year corporate bond? Round your answer to one decimal place. %
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