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The real rate of interest is 2 % and is expected to remain constant for the next 3 years. Inflation is expected to be 3

The real rate of interest is 2% and is expected
to remain constant for the next 3 years.
Inflation is expected to be 3% next year, 3.5%
the following year, and 4% the third year. The
maturity risk premium is estimated to be 0.1*
(t-1)%, where t= number of years to
maturity. The liquidity premium on relevant 3-
year securities is 0.25%, and the default risk
premium on relevant 3-year securities is 0.6%.
What is the yield on a 1-year T-bill, a 3-year
bond and a 3-year corporate bond?
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