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The real risk free rate of interest is expected to remain constant at 3%for the foreseeable future. However, inflation is expected to steadily increase over the next 20 years, so the treasury yield curve is upward sloping. Assume that the expectations theory holds. You are considering two corporate bonds. That is a 5 year corporate bond and a 10 year corporate bond, each of which has the same default risk and liquidity risk. Given this information, which of the following statements is most correct? Please show me all work so I understand it.

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Financial Management, Finance

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