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You are given the following information: r * * = 1 . 0 % The current interest rate on a 1 year loan to the
You are given the following information:
The current interest rate on a year loan to the US government
The MRP on year bonds
The LP on US and Zeniba Inc. bonds
The interest rate on a year loan to Zeniba Inc. is times the rate on a year loan to the US government
a What is the inflation rate expected to be over the next year?
b Suppose the average annual inflation rate expected each year over the next years is the same as the inflation rate expected over the next year. What should be the current interest rate on a year loan to the US government?
c What is the DRP on a year loan to Zeniba Inc.?
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