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What is the yield on a 10-year treasury

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The real risk-free rate of interest, r*, is 4%, and is expected to remain constant over time. Inflation is expected to be 2% per year for the next three years, after which time inflation is expected to remain constant at 5% per year. The maturity risk premium is equal to 0.1(t-1)%, where t = the bond's maturity. Default risk is 1 %, and the liquidity premium is 1.5% on corporate bonds of similar maturity. What is the yield on a 10-year Treasury?

Reference no: EM132686858

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