Koy Corporation's 5-year bonds yield 8.15%, and 5-year T-bonds yield 4.90%. The real risk-free rate is r* = 3.10%, the inflation premium for 5-year bonds is IP=1.40%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP=(t-1) x 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? Not Answered 4.00% b O Ob. 3.25% 3 O Oc2.10% O d. 2.85% O e 2.50%
Koy Corporation's 5-year bonds yield 8.15%, and 5-year T-bonds yield 4.90%. The real risk-free rate is r* = 3.10%, the inflation premium for 5-year bonds is IP=1.40%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP=(t-1) x 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? Not Answered 4.00% b O Ob. 3.25% 3 O Oc2.10% O d. 2.85% O e 2.50%
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
Problem 1PS
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Koy Corporation's 5-year bonds yield 8.15%, and 5-year T-bonds yield 4.90%. The real risk-free rate is r* = 3.10%, the inflation premium for 5-year bonds is IP=1.40%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP=(t-1) x 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? Not Answered 4.00% b O Ob. 3.25% 3 O Oc2.10% O d. 2.85% O e 2.50%
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