Crockett corporations 5-year bonds yield 639 and 5-year, Ask an Expert

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Crockett Corporation's 5-year bonds yield 6.39%, and 5-year T-bonds yield 4.43%. The real risk-free rate is r* = 2.70%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) × 0.1%, where t = number of years to maturity. What inflation premium (IP) is built into 8-year bond yields?

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Financial Management, Finance

Category:- Financial Management
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