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2nd answer needed but first picture relates to that question The real risk free rate (r) is 3%. Inflation, over the next 5 years, is
2nd answer needed but first picture relates to that question
The real risk free rate (r) is 3%. Inflation, over the next 5 years, is expected to average 3%. The Default Risk Premium for AAA rate borrowers is 1%. The Liquidity Premium for AAA borrowers is 1%. The Maturity Risk Premium for 5 year bonds is 2%. Big Company, a AAA rated company, intends to issue bonds with a 5 year maturity. At what rate of interest should Big Company expect to issue its bonds? O a. 6% O b. 7% 4 O c. 8% O d. 9% e. 10% The Federal Government is intending to issue 5 year bonds. Given the information in the previous question, at what rate of interest should the Federal Government expect to issue its bonds? a 6% 6.7% c.8% d. 9% De 10% Step by Step Solution
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