Bond Y is a long-term bond with an 8% interest rate. Over the life of the bond, the average expected annual inflation rate is 2%. The bond's DRP is 2% and its LP is 0.5%. The applicable maturity risk premium is 1%. What is the real risk-free rate? a. 1.5% b. 2.0% c. 2.5% d. 3.0% e. 3.5%
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- Assume that the real risk free rate is 3% and the average annual expected inflation rate is 5%. The DRP and LP for Bond A are each 1% and the applicable MRP is 2%. What is bond A’s interest rate?Assume the real risk-free is 1% and the average annual expected inflation rate is 4%. The DRP and LP for bond A are each 3%, and the applicable MRP is 3%. What is Bond A's interest rate?Bonds have a maturity risk premium that can be modeled as the following:MRP = (t-1) 0.3%were t represents the years to maturity. What is the Maturity risk premium of a bond that matures in 8 years? answer in % without the symbol
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