For example, if you know that the real rate of interest is 4% and it is expected to remain constant for the next 3 years, inflation is expected to be 1.60% next year, 3.90% the following year, and 5.40% the third year, then the average expected inflation rate over the next three years is 3160s+3.90s+5.005=3.63%. 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 premlum nor liquidity risk premium, is as follows: m1=r+IP1+MRP1=4%+1.60%+0.1(11)%=5.60% Compiete the following table by caiculating 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=0.35%, and the default risk premium on 3-year bonds is DRP=1.50%. The formula for calculating the yield on a corporate bond is rsip=IP+LP+MRPrcop=r+IP+DRP+LP+MRPrcopp=r+IP+LP+MRPrcopp=IP+DRP+LP+MRP The formula for calculating the yield on a corporate bond is rcap=IP+LP+MRPrcom=r+IP+DRP+LP+MRPrcopp=r+IP+LP+MRPramp=IP+DRP+LP+MRP The yieid on a 3-year corporate bond is Suppose the real risk-free rate of interest is r=4% and it is expected to remain constant over time. Inflation is expected to be 1.60% per year for the next two years and 3.90% 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 0.35%, and the default risk premium for a corporate bond is 1.50%. The average infletion during the first 4 years is What is the yield on a 4-year Treasury bond? 8.90% 6.75% 4.30% 7.05% What is the yield on a 4-year BBB-rated bond? 7.40% 8.55% 8.90% 7.05% If the yield on a 5 -year Treasury bond is 7.38% and the yield on a 6 -year Treasury bond is 7.88%, the expected inflation in 6 years is (Hint: Do not round intermediate calculations.)