The real risk free rate, r*, is expected to remain constant at 3%. inflation is expected to be 2% a year for the next 3 years, and then 4% a year thereafter. The maturity risk premium 0.1% times (t minus 1), where t equals the maturity of the bond. (The maturity risk premium on a 5-year bond is 0.4%). A 5-year corporate bond has a yield of 8.4%. What is the yield on a 7-year corporate bond that has the same default risk and liquidity premiums as the 5-year corporate bond. consider that the 5-year has inflation and maturity risk included, so you must remove those and replace those for the 7-year. Yes this is a challenging problem! 8.73% 8.94% 8.65% 7.98% 9.24%