Market interest rate on the corporate security

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Inflation is expected to be 3% over the next year. You desire an annual real rate or return of 2.5% on your investments.

a. What market rate of interest would have to be offered on a one-year Treasury security for you to consider making an investment?

b. A one-year corporate debt security is being offered at two percentage points over the one-year Treasury security rate that meets your requirement in (a). What points would be the market interest rate on the corporate security?

Reference no: EM133057505

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