Assume That During a 7-Year Period,inflation Averaged 2

Multiple Choice

Assume that during a 7-year period,inflation averaged 2.8 percent,U.S.Treasury bill yields averaged 3.3 percent,and long-term government bond yields averaged 5.9 percent.What was the average rate of return on long-term corporate bonds if they commanded a risk premium of 0.2 percent more than the long-term government bonds?

A) 9) 2%
B) 8) 9%
C) 5) 7%
D) 6) 1%
E) 9) 4%