Chandler Co.'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 infla
-
answerhappygod
- Site Admin
- Posts: 899603
- Joined: Mon Aug 02, 2021 8:13 am
Chandler Co.'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 infla
Chandler Co.'s 5-year bonds yield 7.00%, and 5-year T-bondsyield 5.15%. The real risk-free rate is r* = 3.0%, the inflationpremium for 5-year bonds is IP = 1.75%, the liquidity premium forChandler's bonds is LP = 0.75% versus zero for T-bonds, and thematurity risk premium for all bonds is found with the formula MRP =(t − 1) × 0.1%, where t = number of years to maturity. What is thedefault risk premium (DRP) on Chandler's bonds?