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The real risk-free rate of interest, r*, is 4%, and it is expected to remain constant over time.Inflation is expected to be 2% per year
The real risk-free rate of interest, r*, is 4%, and it 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 5% per year.The maturity risk premium is equal to 0.1(t - 1)%, where t is the bond's maturity.The liquidity and default risk premia on 10-year corporate bonds are 2.0% and 2.5%, respectively.What is the yield to maturity on a 10-year corporate bond?
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