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Yield in percent on a 3-year corporate bond

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An analyst evaluating securities has obtained the following information. The real rate of interest is 2%and is expected to remain constant for the next 3 years. in?ation is expected to be 3% next year, 3.5% the following year. and 4% the third year. The maturity risk premium is expected to be 0.1 x (H) where t is the number of years to maturity. The liquidity premium on relevant 3-year securities is 0.25% and the default risk premium on relevant 3-year securities is 0.6%. What is the yield in percent on a 3-year corporate bond?

Reference no: EM133076595

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