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please answer An investor in Treasury securities expects inflation to be 1.5% in Year 1,2.1% in Year 2 , and 2.75% each year thereafter. Assume
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An investor in Treasury securities expects inflation to be 1.5% in Year 1,2.1% in Year 2 , and 2.75% each year thereafter. Assume that the real risk-free rate is 2.45% and that this rate will remain constant. Three-year Treasury securities yield 6.50%, while 5-year Treasury securities yield 8.00%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP 3 ? Do not round intermediate calculations. Round your answer to two decimal places. A 5 -year Treasury bond has a 4.4% yield. A 10 -year Treasury bond yields 6.0%, and a 10 year corporate bond yields 9.0%. The market expects that inflation will average 2.2% over the next 10 years (IP10=2.2%). Assume that there is no maturity risk premium (MRP=0) and that the annual real risk-free rate, r, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP =LP=0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10 -year corporate bond described. What is the yield on this 5 -year corporate bond? Round your answer to one decimal place Step by Step Solution
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