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The real risk - free rate is expected to remain constant at 3 % in the future, a 2 % rate of inflation is expected
The real riskfree rate is expected to remain constant at in the future, a rate of inflation is expected for the next years, after which inflation is expected to increase to and there is a positive maturity risk premium that increases with years to maturity. Given these conditions, which of the following statements is CORRECT?
tablea The yield on a year Tbond must exceed that on a year Tbond.b The yield on a year Treasury bond must exceed that on a year Treasury bond.c The yield on a year Treasury bond must exceed that of a year corporate bond.d The conditions in the problem cannot all be truethey are internally inconsistent.e The Treasury yield curve under the stated conditions would be humped rather thanhave a consistent positive or negative slope.
Koy Corporation's year bonds yield and year Tbonds yield The real riskfree rate is the inflation premium for year bonds is IP the liquidity premium for Koy's bonds is versus zero for Tbonds, and the maturity risk premium for all bonds is found with the formula MRP where number of years to maturity. What is the default risk premium DRP on Koy's bond
tablea
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