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D A 5-year T-note is offering a yield of 7%. Average inflation for the 5 years is expected to be 3% (IP5, t), and you

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D A 5-year T-note is offering a yield of 7%. Average inflation for the 5 years is expected to be 3% (IP5, t), and you expect a real interest rate (k") of 3%. You conclude that the T-note carries: A default risk premium of 1% A liquidity premium of 1% An inflation premium of 1% A maturity risk premium of 1%

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