Question: Must be in Excel format and you need to write down all necessary steps/formulas leading to your results Suppose the real risk-free rate is 3.50%,

Must be in Excel format and you need to write down all necessary steps/formulas leading to your results

Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, a maturity premium of 0.08% per year to maturity applies, i.e., MRP = 0.08%*t, where t is the years to maturity. Suppose also that a liquidity premium of 0.5% and a default risk premium of 0.85% applies to A-rated corporate bonds. How much higher would the rate of return be on a 10-year A-rated corporate bond than on a 5-year Treasury bond?

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