Question: Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 3.5 % yield. A 10-year Treasury bond yields 6.6 % , and

Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 3.5 % yield. A 10-year Treasury bond yields 6.6 % , and a 10-year corporate bond yields 8.7 %. The market expects that inflation will average 3.6 % over the next 10 years (IP1D 3.6 % ) . Assume that there is no maturity 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 premium and the liquidity premium are zero for Treasury securities: DRP LP-0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet What is the yield on this 5-year corporate bond? Round your answer to two decimal places A D G Interest rate premiums 2 5-year Treasury yield (Ts) 3.50% 10-year Treasury yield (T10) 6.60% 10-year Corporate yield (C) 5 8.70% Inflation Premium over 10 years (IP) Maturity Risk Premium (MRP) DRP Treasury LP Treasury 10 DRPcs+ LPcs DRP10+ LPO10 3.60% 0.00% 0.00% 0.00% 7 11 Formulas #N/A 12 Real risk-free rate, r 13 14 Inflation premium over 5 years (IP) #N/A 15 16 DRP,+LP1 #N/A 17 18 5-year Corporate yleld (C) #N/A

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