A particular security's default risk premium is 4 percent. For all securities, the inflation risk premium is 3.65 percent and the real risk- free rate is 2.50 percent. The security's liquidity risk premium is 0.35 percent and maturity risk premium is 0.95 percent. The security has no special covenants. Calculate the security's equilibrium rate of return. (Round your answer to 2 decimal places.) > Answer is complete but not entirely correct. Rate of return 8.65%
A particular security's default risk premium is 4 percent. For all securities, the inflation risk premium is 3.65 percent and the real risk- free rate is 2.50 percent. The security's liquidity risk premium is 0.35 percent and maturity risk premium is 0.95 percent. The security has no special covenants. Calculate the security's equilibrium rate of return. (Round your answer to 2 decimal places.) > Answer is complete but not entirely correct. Rate of return 8.65%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text:A particular security's default risk premium is 4 percent. For all securities, the inflation risk premium is 3.65 percent and the real risk-
free rate is 2.50 percent. The security's liquidity risk premium is 0.35 percent and maturity risk premium is 0.95 percent. The security
has no special covenants. Calculate the security's equilibrium rate of return. (Round your answer to 2 decimal places.)
> Answer is complete but not entirely correct.
Rate of
return
8.65%
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