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What would be the interest rate on a 10-year Treasury bond, given the following information? kpr = 2% MR = 0.1% for a 1-year loan,
What would be the interest rate on a 10-year Treasury bond, given the following information? kpr = 2% MR = 0.1% for a 1-year loan, increasing by 0.1% each additional year. LR = 0.5% DR= 0 for a 1-year loan, 0.1% for a 2-year loan, increasing by 0.1% for each additional year. Expected inflation rates: Year 1 = 3.0% Year 2 = 4.0% Year 3 and thereafter: 5.0% 6.7% 9.1% 7.7% 8.9%
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