The risk free rate of interest is 3%. Inflation is expected to be 4% this year, 5% next year and 7% the following years. Assume the maturity risk premium is calculated to be .10x(t-1)%, default risk premium is .5% and liquidity premium is .25% per year.
A. What is the yield on a 4 year bond?
B. A 6 year bond?
Please answer both and show work using Excel.