# Yield on Corporate Bond

Real risk-free rate of interest is 2%.

Market expects that inflation will 3% each year for the next 5 years.

Average 5% a year following

Maturity risk premium is estimated to be MRPt = 0.1(t - 1)%. In other

Maturity risk premium on a 2 year security is 0.1 %.

10 year corporate bond yields 8.6%.

What is the yield on an 8 year corporate bond that has the same default risk and liquidity as the ten-year bond?

https://brainmass.com/economics/risk-analysis/yield-on-corporate-bond-53706

#### Solution Preview

To do this we fist need to find the 10 year treasury rate so as to get the default risk ...

#### Solution Summary

The solution explains how to calculate the yield on a corporate bond given the various components of total risk

$2.19