1 Meive an example of primary capital market and secondary capital market traction Primary Secondary intermediary Financial market Financial intermediary 51 Given the following information, calculate the interest rate on each of the securities for problems 1-2. 52 53 54 8. A 20-year Treasury Bond 55 56 9. A 15-year large issue BB corporate bond 57 58 kkrf+IP + DRP+LP+MRP+ SCP 59 60 Current Real Risk-Free Rate of Interest 0.8% 61 62. Expected Average Annual Inflation Rate 63 2 years - 1.0% 64 5 years -1.5% 65 15 years - 2.0% 66 20 years - 3.0% 67 68 Liquidity Premium on Treasury Bonds - 69 Liquidity Premium on Large Corporate Issues -0.3% 70 Liquidity Premium on Small Corporate Issues = 0.5% Default Risk Premium Treasury Bonds 0.0% AA Corporate Bonds - 1.2% BB Corporate Bonds - 2.8% Maturity Premiums 2 years -0.0% 5 years =0,20% 15 years = 1.1% 20 years - 1.3% 71 72. Special Characteristics Premiums 73 Call Provision=0.9% 74 Convertible Provision-1.0% 75