What is the yield on this 5-year corporate bond

Assignment Help Finance Basics
Reference no: EM133123096

A 5-year Treasury bond has a 3.1% yield. A 10-year Treasury bond yields 6.05%, and a 10-year corporate bond yields 8.95%. The market expects that inflation will average 3.75% over the next 10 years (IP10 = 3.75%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP = LP = 0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described.

What is the yield on this 5-year corporate bond? Round your answer to two decimal places.

Reference no: EM133123096

Questions Cloud

Compute the discount rate : Compute the discount rate. (Do not round intermediate calculations. Input your answer as a percent rounded up to the nearest whole percent.)
Dcf forecast : 1. Select a publicly held company of your choice. MICROSOFT
How much interest will have been earned : Suppose he leaves the accumulated contributions for another 6 years in the RRSP at 3.4% compounded monthly. How much interest will have been earned
Discuss the procedures for the preservation of evidence : Discuss the procedures for the preservation of evidence; be sure to connect this work with the chain of custody. Describe consequences
What is the yield on this 5-year corporate bond : What is the yield on this 5-year corporate bond? Round your answer to two decimal places.
What amount be reported as appropriated retained earnings : Nancy Company issued 200,000 shares of P5 par value at P10 per share. What amount should be reported as appropriated retained earnings at year-end
What are the break-evens : On a per contract basis, what are the break-evens, best cases and worst cases, and when do the worst and best cases occur?
What is the effective annual rate : Q1. Royal International Bank (RIB) charges an interest rate of 1.25% per month on loans to its customers. Like all lenders, RIB must report an annual percentage
What effective rate of interest does his saving account have : Peter wants to save $2,600 in nine months by depositing $860 at the end of every three months into a savings account. What effective rate of interest does have

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd