Problem 6.18 – Yield Curves


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Given the inflation rates, real risk-free rate, maturity risk premiums, premium increase, and the limit: a.) Calculate the interest rate on 1-year, 2-year, 3-year, 4-year, 5-year, 10-year, and 20-year Treasury securities b.) Estimate and plot what you believe a AAA-rated company’s yield curve. c.) On the same graph, plot the approximate yield curve of a much riskier lower-rated company.

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