Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 3% yield. A 10-year Treasury bond yields 6%, and a 10-year corporate bond yields 8.7%. The market expects that inflation will average 3.6% over the next 10 years (IP10 = 3.6%). 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. % B12 fx B D E F G H I 1 Interest rate premiums 2 3 5-year Treasury yield (TS) 3.00% 4. 10-year Treasury yield (T10) 6.00% 5 10-year Corporate yield (C10) 8.70% 3.60% 0.00% 0.00% 0.00% 6 Inflation Premium over 10 years (IP10) 7 Maturity Risk Premium (MRP) 8 DRP Treasury 9 LP Treasury 10 DRPcs + LPcs = DRPC10 + LPC10 11 12 Real risk-free rate, r* 13 Formulas #N/A #N/A 14 Inflation premium over 5 years (IPS) 15 #N/A 16 DRP 10 + LP 10 17 18 5-year Corporate yield (C5) 19 #N/A 20 21 22 23 24 25 26 27