Now its time for you to practice what youve learned.

Suppose the real risk-free rate of interest is r*=3% and it is expected to remain constant over time. Inflation is expected to be 1.20% per year for the next 4 years and 3.70% 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 0.55%, and the default risk premium for a corporate bond is 1.80%.

Complete the following table by calculating yields on Treasury and corporate bonds of various maturity.

	Value
The yield on a 5-year Treasury bond
The yield on a 5-year corporate bond
The yield on a 10-year Treasury bond
The yield on a 10-year corporate bond
Expected inflation in 11 years, if the yield on a 11-year Treasury bond is 6.92%