Final answer:
The total expected interest rate for an A-rated 5-year bond combining all the given premiums (risk-free rate, inflation premium, default risk premium, maturity risk premium, and liquidity premium) is 9%.
Step-by-step explanation:
An investor who buys a bond expects to receive a rate of return which compensates them for delaying consumption, adjusts for inflation, and includes a risk premium based on the borrower's riskiness. The total expected return on a bond is a sum of several components. In the given scenario, the components include a risk-free rate (rrf) of 3%, an inflation premium (ip) of 2%, a default risk premium (drp) for A-rated bonds of 2%, a maturity risk premium for 5-year bonds of 1%, and a liquidity premium for A-rated bonds of 1%.
The calculation of the total expected interest rate for an A-rated 5-year bond, in this case, would be the sum of all these premiums and rates: 3% + 2% + 2% + 1% + 1%, which equals a total of 9%.