What is the yield on this five-year corporate bond

Assignment Help Finance Basics

Reference no: EM133273756

Question - A 5-year Treasury bond has a 5.2% yield. A 10-year Treasury bond yields 6.2%, and a 10-year corporate bond yields 9.8%. The market expects that inflation will average 2.3% over the next 10 years (IP10 = 2.3%). 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?

Reference no: EM133273756

Questions Cloud

What physician orders do you anticipate at this time : NURSING 3125 University of Florida Explain the reasoning. Also, discuss the nursing interventions you would implement. What physician orders do you anticipate

Article about an ethical issue : Identification of the people involved, including those making the ethical/unethical decision(s) and those who were negatively/positively affected

What was your holding period return from june to today : The broker charged you no interest on the account. Now, Blue shares trade at $51.82. What was your holding period return from 1 June to today

Role of nurse in addressing the outbreak : NURS 4115 Walden University role of nurse in addressing the outbreak. Two to three possible health promotion/health protection strategies

What is the yield on this five-year corporate bond : A 5-year Treasury bond has a 5.2% yield. A 10-year Treasury bond yields 6.2%, What is the yield on this five-year corporate bond

What resources (local and national) could you provide : NRS- 410v Grand Canyon University What resources (local and national) could you provide to your patient to support them after they are discharged

Explain whether argument is valid or invalid : Graduate from UMA, Sally must pass all of her classes. Sally passed all of her classes at UMA. Therefore, Sally will graduate from UMA

Calculate the price of a canadian dollar call option : The spot rate on March 6 is 1.01 USD/CAD. US and Canadian interest rates are 0.25% and 1 % respectively, Calculate the price of a Canadian dollar Call option

How would you explain the importance of hypertension : NURS 3902 St. Catherine University how would you explain the importance of hypertension medications and how to take them safely, using simple terms

User Account

All Pages