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What should be the interest rate

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The real risk-free rate of interest is 7.1%. Inflation is expected to be 4% this coming year, jump to 6% next year, and increase to 8% in year 3. The default risk premium and liquidity premium are 2% each for 2-year corporate securities, and 2.5% each for 3-year corporate securities. Maturity risk premium is zero for 1-year bonds and increases by 0.3% per year thereafter for up to 10 years. What should be the interest rate on 2-year Government securities today?

Reference no: EM133120908

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