Question 8 (2 points) The real risk-free rate of interest is expected to remain constant...
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Question 8 (2 points) The real risk-free rate of interest is expected to remain constant at 3%. Inflation rate is expected to be 2.5% this year, 2.2% next year and 2.3% per year thereafter. The maturity risk premium (MRP) is equal to 0.15(t-1)%, where t = the bond's maturity. A 6-year corporate bond yields 8%. What is the yield on a 9-year corporate bond that has the same default risk and liquidity premiums as the 6-year corporate bond? A) 8.44% B) 8.63% C) 8.28% OD) 8.31% E) 8.88%
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