6. Assume that market expects the Inflation rate to be 3% next two years, 6% later year and 7% thereafter. The risk free rate is 2% whereas the maturity risk is zero for bonds with maturity in 1 year...


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6. Assume that market expects the Inflation rate to be 3% next two years,<br>6% later year and 7% thereafter. The risk free rate is 2% whereas the<br>maturity risk is zero for bonds with maturity in 1 year or less and 0.2%<br>for more than 1 year bonds and then this MRP increases by 0.1% every<br>year thereafter till 15 years. What should be the return on bonds with<br>maturity of 1 year, 10 years and 15 years bonds?|<br>

Extracted text: 6. Assume that market expects the Inflation rate to be 3% next two years, 6% later year and 7% thereafter. The risk free rate is 2% whereas the maturity risk is zero for bonds with maturity in 1 year or less and 0.2% for more than 1 year bonds and then this MRP increases by 0.1% every year thereafter till 15 years. What should be the return on bonds with maturity of 1 year, 10 years and 15 years bonds?|

Jun 09, 2022
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