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The real risk free rate of interest r^* is 4% and is expected to remain constant over time. inflation is expected to be 2% per
The real risk free rate of interest r^* is 4% and is expected to remain constant over time. inflation is expected to be 2% per year for the next three years after which time inflation is expected to remain at a constant rate of 1% per year. the maturity risk premium is equal to ].1(t-1)% where t is the bond's time to maturity. The liquidity and default risk premium on 10-year corporate bonds are 2.0% and 2.5% respectively. What is the yield on a 10-year treasury bond?
a. 6.0% b.7.3% c.6.2% d.5.8% e.6.8%
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