Now it's time for you to practice what you've learned.

Suppose the real risk$-$free rate of interest is $r^{**}=3\%$ and in is expected to remain constant over time. Inflation is expected to be $1\mathrm{.}40\%$ per year

for the next $3$ years and $3\mathrm{.}80\%$ per year for the next $5$ years. The maturity risk premium is $0\mathrm{.}1(t-1)\%,$ where $t$ is number of years to

maturity, a liquidity premium is $0\mathrm{.}25\%,$ and the default risk premium for a corporate bond is $1\mathrm{.}90\%.$

Complete the following table by calculating yields on Treasury and corporate bonds of various maturity.

Value

The yield on a $4-$year Treasury bond

The yield on a $4-$year corporate bond

The yield on a $8-$year Treasury bond

The yield on a $8-$year corporate bond

Expected inflation in $9$ years, if the yield on a $9-$year Treasury bond is $6\mathrm{.}93\%$