Now it's time for you to practice what you've learned. Suppose the real risk-free rate of interest is r* = 4% and it is

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Now It S Time For You To Practice What You Ve Learned Suppose The Real Risk Free Rate Of Interest Is R 4 And It Is 1 (26.64 KiB) Viewed 46 times

Now it's time for you to practice what you've learned. Suppose the real risk-free rate of interest is r* = 4% and it is expected to remain constant over time. Inflation is expected to be 1.60% per year for the next 4 years and 3.80% per year for the next 6 years. The maturity risk premium is 0.1 x (t-1) %, where t is number of years to maturity, a liquidity premium is 0.35%, and the default risk premium for a corporate bond is 1.40%. Complete the following table by calculating yields on Treasury and corporate bonds of various maturity. Value The yield on a 5-year Treasury bond The yield on a 5-year corporate bond The yield on a 10-year Treasury bond The yield on a 10-year corporate bond Expected inflation in 11 years, if the yield on a 11-year Treasury bond is 8.10% 11