Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.7%, and a 10-year corporate bond yields 9.5%. The market expects that inflation will average 2.7% over the next 10 years (IP10 = 2.7%). 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. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet What is the yield on this 5-year corporate bond? Round your answer to two decimal places. % B U 1 23 Interest rate premiums 5-year Treasury yield (T5) 4 10-year Treasury yield (T10) 4.80% 6.70% 5 10-year Corporate yield (C10) 9.50% 6 Inflation Premium over 10 years (IP10) 2.70% 7 Maturity Risk Premium (MRP) 0.00% 8 DRP Treasury 0.00% 9 LP Treasury 0.00% 10 DRPC5+ LPC5 = DRPC10 + LPC10 11 12 Real risk-free rate, r* 13 14 Inflation premium over 5 years (IP 5) 15 16 DRP 10 + LP 10 17 18 5-year Corporate yield (C5) 19 20 21 23 2222 D E Formulas #N/A #N/A #N/A #N/A