A 5-year treasury bond has a 375 yield a 10-year treasury

Assignment Help Accounting Basics

Reference no: EM13607139

A 5-year Treasury bond has a 3.75% yield. A 10-year Treasury bond yields 6.35%, and a 10-year corporate bond yields 9.1%. The market expects that inflation will average 3.75% over the next 10 years (IP10 = 3.75%). Assume that there is no maturity risk premium (MRP = 0), and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP = LP = 0). A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described above. What is the yield on this 5-year corporate bond? Round your answer to two decimal places. %

Reference no: EM13607139

Questions Cloud

The force vector a has a magnitude of 750 newtons n and : the force vector. a has a magnitude of 75.0 newtons n and points due east. the force vector b has a magnitude of 139 n

The masses will accelerate in a direction that depends on : consider two masses m1 and m2 that are connected by a rope over a pulley. the masses will accelerate in a direction

In a study of 1000 two parent families a researcher found : in a study of 1000 two parent families a researcher found the mean height of the husbands was 68 inches with a standard

Bc is a division of california controls corporation the : bc is a division of california controls corporation. the division manufactures and sells a pump that is used in a wide

A 5-year treasury bond has a 375 yield a 10-year treasury : a 5-year treasury bond has a 3.75 yield. a 10-year treasury bond yields 6.35 and a 10-year corporate bond yields 9.1.

You are in charge of resucing the water consumption in a : you are in charge of resucing the water consumption in a dormitory at a university and thus have been charged with

On december 31 1999 after all adjusting journal entries are : the following data relate to the plant asset account of planter co. at december 31 1999.plant asseta b c doriginal cost

A levitation fan has been selected that delivers this : a hovercraft has a square planform a mass of 1.8 kg and has a plenum pressure requirement of 125 pa. a levitation fan

An analyst is evaluating securities in a developing nation : an analyst is evaluating securities in a developing nation where the inflation rate is very high. as a result the

User Account

All Pages