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Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.80 percent and the real risk free rate is 3.60 percent. The security's liquidity risk premium is 1.25 percent and maturity risk premium is 1.85 percent. The security has no special covenants. Calculate the bond's default risk premium. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Default risk premium 1.70%

Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.80 percent and the real risk free rate is 3.60 percent. The security's liquidity risk premium is 1.25 percent and maturity risk premium is 1.85 percent. The security has no special covenants. Calculate the bond's default risk premium. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Default risk premium 1.70%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.80 percent and the real risk free rate is 3.60 percent. The security's liquidity risk premium is 1.25 percent and maturity risk premium is 1.85 percent. The security has no special covenants. Calculate the bond's default risk premium. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Default risk premium 1.70%
Transcribed Image Text:Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.80 percent and the real risk free rate is 3.60 percent. The security's liquidity risk premium is 1.25 percent and maturity risk premium is 1.85 percent. The security has no special covenants. Calculate the bond's default risk premium. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Default risk premium 1.70%
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