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turboexp
Jul 14, 2008, 01:40 PM
I need help in how to calculate the following question;

Suppose that inflation is expected to be 3% next year, 4% the following year, and 4.5% thereafter. The maturity risk premium is 0.1%(t-1) and the default risk premium is 1.2% Assume that k* is 2% Using this information, calculate the nominal interest rate on the 5 year corporate bond.