The risk free rate of interest is 3 inflation is expected, Ask an Expert

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The risk free rate of interest is 3%. Inflation is expected to be 4% this year, 5% next year and 7% the following years. Assume the maturity risk premium is calculated to be .10x(t-1)%, default risk premium is .5% and liquidity premium is .25% per year.

A. What is the yield on a 4 year bond?

B. A 6 year bond?

Please answer both and show work using Excel.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93048474

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