Question One Use the information below to answer the following question below Period Expected cash Time period flow from cash is to be security received 120 1 1 2 120 2 3 120 3 4 120 4 5 120 5 6 120 6 7 120 7 8 120 8 9 120 9 10 120 10 10 800 10 CALCULATE A) inflation premium (expected rate of inflation) can be derived using 13% as the equilibrium nominal interest rate and 3% as the equilibrium real interest rate. (illustrate using diagram) B)| calculate the expected after-tax real rate of return earned by a tax compliant investor given: 4 Expected Nominal rate = 11% 4 Taxpayer's income tax rate= 35% C duration of this bond given the Present value of expected cash flows is at 12% discount rate. Question One Use the information below to answer the following question below Period Expected cash Time period flow from cash is to be security received 120 1 1 2 120 2 3 120 3 4 120 4 5 120 5 6 120 6 7 120 7 8 120 8 9 120 9 10 120 10 10 800 10 CALCULATE A) inflation premium (expected rate of inflation) can be derived using 13% as the equilibrium nominal interest rate and 3% as the equilibrium real interest rate. (illustrate using diagram) B)| calculate the expected after-tax real rate of return earned by a tax compliant investor given: 4 Expected Nominal rate = 11% 4 Taxpayer's income tax rate= 35% C duration of this bond given the Present value of expected cash flows is at 12% discount rate