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Suppose the real risk free rate of interest is 3%. Inflation is expected to be 5% for 4 years and then 7% thereafter. The maturity risk premium is 0.1%(t), where t is the number of years until maturity. The default risk premium is 3%. The liquidity premium is 1%. What is the nominal interest rate on a 6 year bond?
Assume the yield on a 6 year treasury bond is 6%. IF the real risk free rate of interest is 4% and the inflation premium is 2.5% then what is the maturity risk premium?
What is the coupon payment for a $2,000 par value bond with a 5% annual coupon and a 8% yield to maturity?
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