Thursday
April 17, 2014

Homework Help: Finance

Posted by Mel on Saturday, September 15, 2007 at 9:14pm.

Interest rate premiums A 5-year Treasury bond has a 5.2 percent yield. A 10-year Treasury bond yields 6.4 percent, and a 10-year corporate bond yields 8.4 percent. The market expects that inflation will average 2.5 percent over the next 10 years (IP10 _ 2.5%).
Assume that there is no maturity risk premium (MRP _ 0), and that the annual real riskfree 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 above. What is the yield on this 5-year corporate bond?

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Finance - P5. A thirty U.S. Treasury bond has a 4.0 percent interest rate. In ...
Finance - A thirty-year Treasury bond has a 4.0 percent interest rate. In ...
Finance - A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In ...
finance - A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In ...
Finance - 4.A thirty year US treasury bond has a 4.0 percent interest rate.In ...
Principles of Finance - .A thirty year US treasury bond has a 4.0 percent ...
fanince - ) A thirty-year U.S Treasury bond has a 4.0 percent interest rate. In ...
Finance - A Treasury note with a maturity of four years carries a nominal rate ...
College Finance - 1.A recent edition of The Wall Street Journal reported ...
Finance - An investor purchases a 10-year U.S. government bond for $800. The ...

Search
Members