You are considering an investment in a one-year govt debt, Ask an Expert

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You are considering an investment in a one-year gov't debt security with a yield of 5 % or a highly liquid corporate debt security with a yield of 6.5%. The expected inflation rate for the next year is expected to be 2.5%.

a) What would be your real rate earned on either of the two investments?

b) What would be the default risk premium on the corporate debt security?

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Category:- Basic Finance
Reference No.:- M9863513

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