Problema particular securitys default risk premium is 3, Ask an Expert

Accounting

Problem:

A particular security's default risk premium is 3 percent. For all securities, the inflation risk premium is 2 percent and the real interest rate is 2.25 percent. The security's liquidity risk premium is 0.75 percent and maturity risk premium is 0.90 percent.

Requirement:

Question: The security has no special covenants. What is the security's equilibrium rate of return?

1.78%
3.95%
17.8%
8.90%

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172988

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