Question: A 5 -year Treasury bond has a 5.3% yield. A 10 -year Treasury bond yields 6.4%, and a 10-year corporate bond yields 9.1%. The market

A 5 -year Treasury bond has a 5.3% yield. A 10 -year Treasury bond yields 6.4%, and a 10-year corporate bond yields 9.1%. The market expects that inflation Will average 2.9% over the next 10 years (P10=2.9% ). Assume that there is no moturity risk premium (MRP=0) and that the annual real risk-free rate, r. will remain constant over the next 10 years. (Hint: Remember that the default risk premlum and the lleuidity premlum are zero for Treasury securities: DRP. = LP = 0.) A. S-year corporate bond has the same defoult risk premium and liquidity premium as the to-year corporate bond described. What is the yield on this 5.year corperate bond? Round yout answer to one decimal place

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