Question: Keep the Highest: 1 16. Problem 6.17 (Interest Rate Premiums) eBook A 5-year Treasury bond has a 3.5% yield. A 10-year Treasury bond yields 6.55%,

Keep the Highest: 1 16. Problem 6.17 (Interest Rate Premiums) eBook A 5-year Treasury bond has a 3.5% yield. A 10-year Treasury bond yields 6.55%, and a 10-year corporate bond yields 8.35%. The market expects that inflation will average 2.25% over the next 10 years (IP 10 -2.25%). 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. What is the yield on this 5-year corporate bond? Round your answer to two decimal places

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