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Suppose the real-risk free rate is 2%. Inflation is expected to average 2.05% each year for the next 3 years, 2.5% for 2 years after
Suppose the real-risk free rate is 2%. Inflation is expected to average 2.05% each year for the next 3 years, 2.5% for 2 years after that and 2.75% each year after that. The maturity risk premium is 0.1%(t - 1), where t equals the maturity of the bond. Liquidity premiums = 0.65% and default risk premiums = 1.65%. What is the yield on a 10-year Corporate Bond? Group of answer choices
6.79%
5.39%
7.69%
7.84%
6.13%
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