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Question 5 (2 points) The real risk-free rate of interest is expected to remain constant at 3%. Inflation rate is expected to be 3.5% this

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Question 5 (2 points) The real risk-free rate of interest is expected to remain constant at 3%. Inflation rate is expected to be 3.5% this year, 4.2% next year and 4.5% per year thereafter. The maturity risk premium (MRP) is equal to 0.12(t-1)%, where t = the bond's maturity. A 5-year corporate bond yields 8%. What is the yield on a 7-year corporate bond that has the same default risk and liquidity premiums as the 5-year corporate bond? OA) 8.31% B) 8.11% OC) 8.03% OD) 7.20% E) 7.93%

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