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The real risk-free rate of interest is expected to remain constant at 3.5%. Inflation rate is expected to be 2.5% this year, 2.2% next year
The real risk-free rate of interest is expected to remain constant at 3.5%. Inflation rate is expected to be 2.5% this year, 2.2% next year and 2.3% per year thereafter. The maturity risk premium (MRP) is equal to 0.14(t-1)%, where t= the bonds maturity. A 6 year corporate bond yields 8%. what is the yield on a 8-year corporate bond that has the same default risk and liquidity premiums as the 6 year corporate bond?
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