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Question 6 1 pts Suppose the real risk-free rate is 4%, the average future inflation rate is 1.9%, a maturity premium of 0.05% per year

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Question 6 1 pts Suppose the real risk-free rate is 4%, the average future inflation rate is 1.9%, a maturity premium of 0.05% per year to maturity applies, i.e., MRP = 0.05%(t), where t is the years to maturity. Suppose also that a liquidity premium of 0.7% and a default risk premium of 1% applies to A-rated corporate bonds. How much higher would the rate of return be on a 9-year A-rated corporate bond than on a 5-year Treasury bond. Here we assume that the pure expectations theory is NOT valid. 1.7% 1.9% O 1.8% 1.5% 1.6%

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