Use the following data to answer questions below. Assume the following premiums reflect current market conditions: r* = 3.15%; IP (1-year bonds) = 2.35%; IP (3-year bonds) = 2.65%; IP (5-year bonds) = 2.90%; DRP (AAA corporate bonds) = 0.60%; DRP (AA+ corporate bonds) = 0.85%; LP (AAA corporate bonds) = 0.22%; LP (AA+ corporate bonds) = 0.30%; MRP = 0.1% (t 1) where t is the number of years to maturity

QUESTION

Calculate the interest rate for a 1-year AA+ corporate bond. a. 3.52% b. 10.48% c. 6.65% d. 9.75% Calculate the interest rate for a 5-year AA+ corporate bond. a. 3.52% b. 7.60% c. 5.35% d. 2.75%