Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 4.85% yield….

Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 4.85% yield. A 10-year Treasury bond yields 6%, and a 10-year corporate bond yields 8.2%. The market expects that inflation will average 3.3% over the next 10 years (IP20 = 3.3%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r”, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP – LP -0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. IH X I Open spreadsheet What is the yield on this 5-year corporate bond? Round your answer to two decimal places. % B12 fx B ? D E F N 4.85% 6.00% 8.20% 3.30% 0.00% 0.00% 0.00% A 1 Interest rate premiums 2 35-year Treasury yield (T5) 4 10-year Treasury yield (T10) 5 10-year Corporate yield (C10) 6 Inflation Premium over 10 years (IP10) 7 Maturity Risk Premium (MRP) 8 DRP Treasury 9 LP Treasury 10 DRPcs + LPcs = DRPC10 + LPC10 11 12 Real risk-free rate, r* 13 14 Inflation premium over 5 years (IP) 15 16 DRP10 + LP 10 17 18 5-year Corporate yield (C5) 19 20 21 22 = Sheet1 + Formulas #N/A #N/A #N/A #N/A