The risk free rate of interest is 25 inflation is expected, Financial Management

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The risk free rate of interest is 25 inflation is expected

The risk free rate of interest is 2.5%. Inflation is expected to be 1.6% this year, 2% next year and 3% the following years. Assume the maturity risk premium is calculated to be .15x (t-1)% default risk premium is fixed at 1% and liquidity premium is fixed at 1%. A) What is the yield on a 5 year bond? B) A 9 year bond?

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Financial Management: The risk free rate of interest is 25 inflation is expected

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