1 assume that a 3-year treasury security yields 410 also, Ask an Expert

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1) Assume that a 3-year treasury security yields 4.10%. Also assume that the real risk-free rate (r*) is 0.75% and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal insterest rate includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round answer to two decimal places.

2) A treasury bond that matures in 10 years has a yield of 4.75%. A 10 year corporate bond has a yield of 6.50%. Assume that the liquor premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond? Round answer to two decimal places.

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Financial Management, Finance

Category:- Financial Management
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