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The real risk-free rate of interest, k, is 3.8 percent, and it is expected to remain constant over time. Inflation is expected to be
The real risk-free rate of interest, k", is 3.8 percent, and it is expected to remain constant over time. Inflation is expected to be 2.5 percent per year for the next five years, after which time inflation is expected to remain at a constant rate of 4 percent per year. The maturity risk premium is 0% for securities with maturities of 1 year or less, 0.25% in year 2, and Increases by 0.25% per year thereafter. What is the yield on a 10-year Treasury bond? Select one: O a. 9.7% Ob. 9.3% Oc. 10.8% d. 8.4%
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