A 5-year corporate bond has the same default risk premium, Financial Management

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A 5-year corporate bond has the same default risk premium

A 5-year T-Bond has a 5.2% yield. A 10-yr T-bond yields 6.4% and a 10-yr Corporate bond yields 8.4%. The market expects that inflation will average 2.5% over the next 10 years (IP_10 =2.5%). Assume the there is no MRP and r* will stay constant.. A 5-year corporate bond has the same default risk premium and the liquidity premium as the 10-year corporate bond described. What is the yield on this 5-year corporate bond?

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Financial Management: A 5-year corporate bond has the same default risk premium

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Financial Management: A 5-year corporate bond has the same default risk premium

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