Solved: What is the yield on a seven year bond for dc, Finance Basics

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What is the yield on a seven year bond for dc

Problem:

DC Corporation's 4-year bonds currently yield 7.4 percent. The real risk-free rate of interest, r* is 2.7% and is assumed to be constant. The MRP is estamited to be 0.1%(t-1), where t is equal to the time to maturity. The default risk and liquidity premiuns total 0.9% If the average inflation rate is expected to be 5% for years 5,6, and 7, what is the yield on a 7 year bond for DC?

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Finance Basics: What is the yield on a seven year bond for dc

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