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eBook A 5-year Treasury bond has a 4.3% yield. A 10-year Treasury bond yields 6.9%, and a 10-year corporate bond yields 8.95% The market expects
eBook A 5-year Treasury bond has a 4.3% yield. A 10-year Treasury bond yields 6.9%, and a 10-year corporate bond yields 8.95% The market expects that inflation will average 3.45% over the next 10 years (IP10-3.45%). Assume that there is no maturity risk premium (MRP-0) and that the annual real risk-free rate,wll remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP LP = O.) 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? Round your answer to two decimal places
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