Question: A 5-year Treasury bond has a 4.3% yield. A 10 -year Treasury bond yields 6.4%, and a 10 -year corporate bond yields 9.8%. The market

A 5-year Treasury bond has a 4.3% yield. A 10 -year

A 5-year Treasury bond has a 4.3% yield. A 10 -year Treasury bond yields 6.4%, and a 10 -year corporate bond yields 9.8%. The market expects that inflation will average 2.85% over the next 10 years ( IP10=2.85% ). Assume that there is no maturity risk premium (MRP =0 ) and that risk-free rate, r, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the lide question below

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