Dakota Corporation 15-year bonds have an equilibrium rate of return of 8 percent. For all securities, the inflation risk premium is 1.50 percent and the real risk-free rate is 2.60 percent. The security's liquidity risk premium is 0.60 percent and maturity risk premium is 1.20 percent. The security has no special covenants. Calculate the bond's default risk premium. (Round your answer to 2 decimal places.) Default risk premium %

Dakota Corporation 15-year bonds have an equilibrium rate of return of 8 percent. For all securities, the inflation risk premium is 1.50 percent and the real risk-free rate is 2.60 percent. The security's liquidity risk premium is 0.60 percent and maturity risk premium is 1.20 percent. The security has no special covenants. Calculate the bond's default risk premium. (Round your answer to 2 decimal places.) Default risk premium %

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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