Question
-if 10-year T-bonds have a yield of 5.3%, 10-year corporate bonds yield 8.0%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate
-if 10-year T-bonds have a yield of 5.3%, 10-year corporate bonds yield 8.0%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?
-The real risk-free rate is 2.85%, inflation is expected to be 6.15% this year, and the maturity risk premium is zero. Ignoring any cross-product terms, i.e., if averaging is required, use the arithmetic average, what is the equilibrium rate of return on a 1-year Treasury bond?
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