The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 4% per year for each of the next two years and 3% thereafter. The maturity risk premium (MRP) determined from the formula: 0.1(t-1) %, where t is the security's maturity. The liquidity premium (LP) on all Rinsemator Group's bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating U.S. Treasury AAA AA A BBB O 7.28% 8.13% Rinsemator Group issues 15-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 8.68% Default Risk Premium 5.55% 0.60% 0.80% 1.05% 1.45%

You. are planning to purchase a new vehicle in three years for $40,000. You want to be able to pay cash for your new car when it is time. In the meantime, you can earn 4% on the cash you are saving. The cash is compounded annually. How much must I save out of each year's Christmas bonus over the next three years in order to pay cash for my new car? Hint: You don't have any money in your savings account now. In other words, your PV is $0