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 %
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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Transcribed Image Text: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
%
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