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Suppose the real risk-free rate is 2.50%, the average future inflation rate is 3.50%, a maturity premium of 0.08% per year to maturity applies, i.e.,

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Suppose the real risk-free rate is 2.50%, the average future inflation rate is 3.50%, a maturity premium of 0.08% per year to maturity applies, i.e., MRP = 0.08%(t), where t is the years to maturity. Suppose also that a liquidity premium of 0.6% and a default risk premium of 0.85% applies to A-rated corporate bonds. How much higher would the rate of return be on a 15-year A-rated corporate bond than on a 15-year Treasury bond? O 1.25% O 1.45% O 1.15% O 1.55% O 1.35%

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