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Disney Corporation's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.30%. The real risk-free rate is r* = 2.5%, the default risk premium for Disney's
Disney Corporation's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.30%. The real risk-free rate is r* = 2.5%, the default risk premium for Disney's bonds is DRP = 1.90% versus zero for T-bonds, the liquidity premium on Disney's bonds is LP = 1.3%, 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 inflation premium (IP) on all 5-year bonds? Group of answer choices 1.06% 1.40% 1.19% 1.32% 1.64%
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