Let S Say A Company Has 5 Year Bonds Yield Of 6 85 And 5 Year T Bonds Yield 4 Th

Let’s say a company has 5-year bonds yield of 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.80%, the default risk premium for the company’s bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on the company’s bonds is LP = 1.25%, 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 inflation premium (IP) on 5-year bonds?

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"