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Problem 6-13 Default Risk Premium The real ri...

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Problem 6-13 Default Risk Premium The real risk rate, r* is 2.5 percent. Inflation is expected to average 3.75 percent a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 8.3 percent, which includes a liquidity premium of 0.75 percent. What is the default risk premium?

 

Paper#11902 | Written in 18-Jul-2015

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