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give acurate answer for upvote An analyst evaluating securities has obtained the following information. The real rate of interest is 3% and is expected to
give acurate answer for upvote
An analyst evaluating securities has obtained the following information. The real rate of interest is 3% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.9% next year, 3.9% the following year, 4.9% the third year, and 5.9% every year thereafter. The maturity risk premium is estimated to be 0.1(t1)%, where t= number of years to maturity. The liquidity premium on relevant 5 -year securities is 0.5% and the default risk premium on relevant 5 -year securities is 1%. a. What is the yield on a 1-year T-bill? Round your answer to one decimal place. % b. What is the yield on a 5-year T-bond? Round your answer to one decimal place. % C. What is the yield on a 5-year corporate bond? Round your answer to one decimal place. %Step by Step Solution
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