What inflation premium is built into five year bond yields

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Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 3.50%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) mc016-1.jpg 0.1%, where t = number of years to maturity. What inflation premium (IP) is built into 5-year bond yields?

Reference no: EM13922969

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