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You observe the following information: nominal risk-free rate: 2.8% expected inflation rate: o Year 1: 1.7% o Year 2: 1.9% o Year 3: 2.2% o

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You observe the following information: nominal risk-free rate: 2.8% expected inflation rate: o Year 1: 1.7% o Year 2: 1.9% o Year 3: 2.2% o Year 4: 2.4% Maturity Risk Premium: 0.12*(t-1); t = years to maturity Liquidity Premium: 0.15% Default Premium: 0.4% Estimate the yield on a 4 year corporate bond. 5.76% 4.34% 3.18% 3.71%

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