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eBook A 5-year Treasury bond has a 4.7% yield. A 10-year Treasury bond yields 6.4%, and a 10-year corporate bond yields 9.45%. The market expec
eBook A 5-year Treasury bond has a 4.7% yield. A 10-year Treasury bond yields 6.4%, and a 10-year corporate bond yields 9.45%. The market expec that inflation will average 1.65% over the next 10 years (IP20 - 1.65%). Assume that there is no maturity risk premium (MRP - 0) and that the annual real risk-free rate, r*, will 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 -0.) 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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