Problemnikki gs corporations 10-year bonds are currently, Ask an Expert

Accounting

Problem:

Nikki G's Corporation's 10-year bonds are currently yielding a return of 6.85 percent. The expected inflation premium is 1.25 percent annually and the real interest rate is expected to be 2.20 percent annually over the next ten years. The liquidity risk premium on Nikki G's bonds is 0.35 percent. The maturity risk premium is 0.20 percent on 4-year securities and increases by 0.08 percent for each additional year to maturity.

Required:

Question: Calculate the default risk premium on Nikki G's 10-year bonds.

Note: Please show how to work it out.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172812

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