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Business, 12.08.2020 08:01 Geo777

Suppose the real risk-free rate is 3.50%,the average future inflation rate is 2.50%, a maturity premium of 0.20% per year to maturity applies, i. e., MRP = 0.20%(t), where t is the years to maturity. Suppose also that a liquidity premium of 0.50% and a default risk premium of 0.80% applies to A-rated corporate bonds. Required:
What is the difference in the yields on a 5-year A-rated corporate bond and on a 10-year Treasury bond?

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Suppose the real risk-free rate is 3.50%,the average future inflation rate is 2.50%, a maturity prem...
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