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Home / Questions / Koy Corporation's 5year bonds yield 800 and 5year Tbonds yield 515The real riskfree rate i...

Koy Corporation's 5year bonds yield 800 and 5year Tbonds yield 515The real riskfree rate is r 30 the inflation premium for 5year bonds is IP 175 the liquidity premium for Koys

Koy Corporation's 5-year bonds yield 8.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, 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) × 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? a. 2.18% b. 2.10% c. 2.48% d. 2.16% e. 2.12%

 

Apr 01 2020 View more View Less

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