You have been asked to determine a rate on a bond. It has a maturity of 10 years, a coupon of 6.00%, and a par value of 1000. You are given the following information
Risk free real rate = 1.80% for ten year treasury
The Inflation Risk Premium is 1.70%
The bond has a liquidity premium of 60 basis points
The default risk premium is 100 basis points
The current market risk premium is .0002 times the maturity in years
1. What is the yield on the bond?
2. What is the nominal rate of the ten-year treasury?