2. Ms. Sharon Corporation has 5-year bonds. Inflation premium (IP) on a 5year bond is 1.00%. The real risk-free rate is r* = 2.80%, the default risk premium for her bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on her bonds is LP = 1.20%, and the maturity risk premium for all bonds is found with the formula MRP = (t 1) x 0.1%, where t = number of years to maturity. What is the yield on her Corporations 5-year bonds?
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