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Question: given the rate information in the table below estimate the...

Question details

Given the rate information in the table below, estimate the nominal rate for a AA-rated

corporate bond. Assume a liquidity premium of 6 basis points. Identify as part of your

answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium.

3-month T-bills 4.0%

30-year Treasury Bonds 6.0%

AA-rated Corp. Bonds 8.0%

Inflation Rate 2.5%

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