Interest rates between corporate and treasury bonds

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Reference no: EM13722761

Assume that k* = 1.5; the maturity risk premium is found as MRP=0.09(t-1) where t= years to maturity; the default risk premium for Corporate bonds is found as DRP= 0.11% (t-1); the liquidity premium is 0.8; and inflation is expected to be 2% in years one 2.5% in year two, and 3% in year three and then 3.5 % thereafter. What is the nominal rate of interest on 1 10 year corporate bond? What is the difference in interest rates between 10-year corporate bonds and 10 year treasury bonds?

Reference no: EM13722761

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