Suppose the real risk$-$free rate is $3\mathrm{.}50\%,$ the average future inflation rate is $2\mathrm{.}50\%,$ a maturity premium of $0\mathrm{.}20\%$ per year to maturity applies, i$.$e$.,$ MRP $=0\mathrm{.}20\%($t$),$ where t is the number of years to maturity. Suppose also that a liquidity premium of $0\mathrm{.}50\%$ and a default risk premium of $2\mathrm{.}70\%$ applies to A$-$rated corporate bonds. What is the difference in the yields on a $5-$year A$-$rated corporate bond and on a $10-$year Treasury bond? Here we assume that the pure expectations theory is NOT valid, and disregard any cross$-$product terms, i$.$e$.,$ if averaging is required, use the arithmetic average.

a$.2\mathrm{.}70$ p$.$p$.$

b$.4\mathrm{.}90$ p$.$p$.$

c$.4\mathrm{.}11$ p$.$p$.$

d$.2\mathrm{.}20$ p$.$p$.$

e$.3\mathrm{.}20$ p$.$p