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Calculating interest rates he real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 7% per year
Calculating interest rates he real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 7% per year for each of the next four years and 6% hereafter. he maturity risk premium (MRP) is determined from the formula: 0.1(t - 1) %, where t is the security's maturity. The liquidity premium (LP) on all ellegrini Southern Inc.'s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating U.S. Treasury Default Risk Premium AAA 0.60% AA 0.80% A 1.05% BBB 1.45%
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