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Question: Assume that the risk free rate is 1.0%. Inflation is expected to be 4% in year one; 3.5% in year two; 3% in year three; 2.5% in year four and then 2% thereafter; the liquidity premium is 0.80%; the maturity risk premium is calculated as MRP = 0.05% (t - 1); and the default risk premium is calculated as DRP = 0.02% (t - 1). What is the nominal rate of interest on a 10 year corporate bond?

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Category:- Basic Finance
Reference No.:- M92776120

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