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Keys Corporation's 5-year bonds yield 7.00%, 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 Keys' 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 Keys' bonds?
Can someone show me how to solve this 1?
number of years to maturity. What is the default risk premium (DRP) on Keys' bonds?
Can someone show me how to solve this 1?