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QUESTION
The real risk-free rate, r*, is 2. Inflation is expected to average 2.8% a year for the next 4 years, after which time inflation is expected to...
The real risk-free rate, r*, is 2.5%. Inflation is expected to average 2.8% a year for the next 4 years, after which time inflation is expected to average 3.75% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 8.3%, which includes a liquidity premium of 0.75%. What is its default risk premium?
The real risk-free rate, r*, is 2.5%. Inflation is expected to average 2.8% a year for the next 4 years, afterwhich time inflation is expected to average 3.75% a year. Assume that there is no...