Question: Save Submit Assignment for Grading Problem 6.17 (Interest Rate Premiums) Question 4 of 10 Check My Work (1 remaining) eBook A 5-year Treasury bond has
Save Submit Assignment for Grading Problem 6.17 (Interest Rate Premiums) Question 4 of 10 Check My Work (1 remaining) eBook A 5-year Treasury bond has a 4% yield. A 10-year Treasury bond yields 6.6%, and a 10-year corporate bond yields 9.25%. The market expects that inflation will average 1.65% over the next 10 years (IP10 = 1.65%). 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. % keAssignment Mai te 0 O 5.13 10/13/2
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