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Suppose the real risk-froe rate is 3.50%, the average future Inflation rite is 2.50%, a maturity premium of 0.20% per year to maturity applies, i.e.,

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Suppose the real risk-froe rate is 3.50%, the average future Inflation rite is 2.50%, a maturity premium of 0.20% per year to maturity applies, i.e., MRP-0.20%), wliere 1 is the number of years to maturity. Suppose also that a liquidity premium of 0.50% and a default riak premium of 1.35% 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? 4.0.71% b, 0.81% c. 0.85% d. 0.89% e. 0.94%

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