For example, if you know that the real rate of interest is 5% and it is expected to remain constant for the next 3 years, inflation is expected to be 1.00% next year, 3.30% the following year, and 4.50% the third year, then the average expected inflation rate over the next three years is 31.00%+3.30%+4.50%=2.93%. If also you can estimate that the maturity risk premium is 0.1(t1)%, where t is number of years to maturity, then the yield on a 1-year Treasury bill, which has neither default risk premium nor liquidity risk premium, is as follows: rT1=r+IP1+MRP1=5%+1.00%+0.1(11)%=6.00% Complete the following table by calculating yields on a 2-and 3-year Treasury bills, respectively. Unlike Treasury securities, corporate bonds have both a default risk premium and a liquidity risk premium. Suppose that the liquidity premium on 3-year bonds is LP=0.45%, and the default risk premium on 3 -year bonds is DRP=1.30%. The formula for calculating the yield on a corporate bond is rcorp=IP+DRP+LP+MRPrcorp=r+IP+LP+MRPrcorp=IP+LP+MRPrcorp=r+IP+DRP+LP+MRP The yield on a 3-year corporate bond is Suppose the real risk-free rate of interest is r=5% and it is expected to remain constant over time. Inflation is expected to be 1.00% per year for the next two years and 3.30% per year for the next three years. The maturity risk premium is 0.1(t1)%, where t is number of years to maturity, a liquidity premium is 0.45%, and the default risk premium for a corporate bond is 1.30%. The average inflation during the first 4 years is What is the yield on a 4-year Treasury bond? 7.45% 9.20% 5.30% 7.15% What is the yield on a 4-year BBB-rated bond? 7.45% 8.75% 7.90% 9.20% If the yield on a 5-year Treasury bond is 7.78% and the yield on a 6 -year Treasury bond is 8.23%, the expected inflation in 6 years is . (Hint: Do not round intermediate calculations.) Now it's time for you to practice what you've learned. Suppose the real risk-free rate of interest is r=5% and it is expected to remain constant over time. Inflation is expected to be 1.00% per year for the next 4 years and 3.30% per year for the next 6 years. The maturity risk premium is 0.1(t1)%, where t is number of years to maturity, a liquidity premium is 0.45%, and the default risk premium for a corporate bond is 1.30%. Complete the following table by calculating yields on Treasury and corporate bonds of various maturity