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8. (4 points) Use the following information to calculate the interest rate on an eight-year bond just issued by Becher Inc. Inflation: next two years
8. (4 points) Use the following information to calculate the interest rate on an eight-year bond just issued by Becher Inc. Inflation: next two years = 2.5%; year 3 and beyond = 4.5% Pure Rate = 2.0%; Maturity Risk Premium = zero for a 1-year maturity, increasing by .1% each year thereafter; Default Risk Premium = 1.5%; Liquidity Risk Premium = 0.0% for treasuries; 0.5% for Corporate bonds a. 7.7% b. 8.2% c. 8.7% d. 9.2% e. 9.4%
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