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Corporate debt for Coffee Corp is AA-rated and has a liquidity premium of 0.20%. AA-rated bonds with a maturity of 4 years have a default
Corporate debt for Coffee Corp is AA-rated and has a liquidity premium of 0.20%. AA-rated bonds with a maturity of 4 years have a default risk premium of 3.5% and a maturity risk premium of 0.4%. The real risk free rate of interest (r*) is thought to be 1%. If expected inflation for the first two years is 2.0% and the next two years is 3.0%, then what is the yield on a Coffee Corp. 5-year bond?
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