Question: he annual yield on a 4 - year corporate security is 6 . 8 7 5 percent, while the anual yeld oa 6 - year

he annual yield on a 4-year corporate security is 6.875 percent, while the anual yeld oa 6-year corporate security is 7.80 percent. Assurne that the real isk-free rate of riterest's expected to be constant over time at 2 percent, the defauitrisk and iquidity premium on both securities is equal to 1.75 percent. Also assume that the maturity risk premium foral securities can be estimated as MRP,=(0.15%)"(t -1), where t is the number ofperiods unl maturity. for Year 2 is 20 percent, for Year3 is
Your analysis shows that the expected rate ofinflation 2.5%, for Year 4 is 3.5 percent. Further, the expected rate of infation for Year 58450 percent. Determine the anticipated the rate of infation for Year 6

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