Calculate the differences in rates of return

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Reference no: EM131520978

The real risk free rate = 3%, the expected inflation rate = 3% each year, and a maturity risk premium = 0.1%(t), where t is the years to maturity. Also a AAA rated corporate bonds have a liquidity premium = 0.50% and a default risk premium = 1%, and zero to T-bonds. Calculate the differences in rates of return between a ten year AAA corporate bond and a five year Treasury bond.

Reference no: EM131520978

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