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Assume that r* = 2%; the maturity risk premium is found as MRP = 0.1% times (t minus 1), where t = years to maturity;

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Assume that r* = 2%; the maturity risk premium is found as MRP = 0.1% times (t minus 1), where t = years to maturity; default risk premium for corporate bonds is found as DRP = 0.05% times ft minus 1); the liquidity premium is 1% for corporate bonds only; and inflation is expected to be 3%, 4%, and 5% during the next three years and then 6% thereafter. What is the difference in interest rates between 10-year corporate and 10-year Treasury bonds. Challenging as well! 0.45% 1.45% 2.2% 2.75% 3.25%

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