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Suppose the real risk - free rate of interest is r * = 3 % and it is expected to remain constant over time. Inflation
Suppose the real riskfree rate of interest is r and it is expected to remain constant over time. Inflation is expected to be per year for the next years and per year for the next years. The maturity risk premium is times t where t is number of years to maturity, a liquidity premium is and the default risk premium for a corporate bond is
Complete the following table by calculating yields on Treasury and corporate bonds of various maturity.
The yield on a year Treasury bond
The yield on a year corporate bond
The yield on a year Treasury bond
The yield on a year corporate bond
Expected inflation in years, if the yield on a year Treasury bond is
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