Answer Happy

The real risk-free rate is 3%, and inflation is expected to be 3% on average for the next 2 years. A 2- year Treasury security yields 6.2%. What is the maturity risk premium for the 2-year security? OA) 0.25% B) 0.30% OC) 0.20% D) 0.10% E) 0.15%

A company's 5-year bonds are yielding 7.75% per year. The real risk-free rate (r) is 2.3%. The average inflation premium is 2.5%; and the maturity risk premium is estimated to be 0.1 x (t-1)%, where t = number of years to maturity. If the liquidity premium is 1%, what is the default risk premium on the corporate bonds? A) 1.65% B) 1.55% OC) 1.60% D) 1.50% E) 1.70%

A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,050, and currently sell at a price of $1,100. What are their nominal yield to call (YTC)? A) 6.41% B) 6.38% OC) 6.35% D) 6.45% OE) 6.49%