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Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 8 basis points.
Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 8 basis points. Identify as part of your answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium. 3-month T-bills 2.0%
30-year Treasury Bonds 5.0%
AA-rated Corp. Bonds 8.0%
Inflation Rate 1.0%
I just cant seem to figure out where to start. Any help will be greatly appreciated.
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