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Assume that the real risk-free rate is r* = 2% and the average expected inflation...

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Accounting

Assume that the real risk-free rate is r* = 2% and the average expected inflation rate is 3% for each future year.

The DRP and LP for Bond X are each 1%, and the applicable MRP is 2%. What is Bond Xs interest rate?

Is Bond X (1) a Treasury bond or a corporate bond and (2) more likely to have a 3-month or a 20-year maturity?

Answer all parts of the question for a good rating. Also show how to solve in excel and on a financial calculator.

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