Suppose a 5-year Treasury bond has a 4.5% yield while a 10-year Treasury bond has a 6.5% yield. A 10-year corporate bond has a 9.5% yield. The market expects that inflation will average 2.75% over the next 10 years (IP10 = 2.75%). The maturity risk premium is equal to 0.1(t - 1)%, where t = the number of years at the bond's maturity. Assume that the annual real risk-free rate of interest, r*, will remain constant over the next 10 years. What is the 5-year expected inflation average and what is the yield on the 5-year corporate bond?

Group of answer choices

1.55%, 6.75%

1.25%, 7.5%

1%, 7%

2.75%, 7.75%

2.75%, 7.5%