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7. 8. 9. Chandler Co.'s 5-year bonds yield 11.25%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium
7. 8. 9. Chandler Co.'s 5-year bonds yield 11.25%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Chandler's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t-1) * 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Chandler's bonds? Select the correct answer. 10. 11. 12. a. 5.13% 13. b. 5.57% 14. C. 5.35% d. 4.69% O 15. e. 4.91% 16
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