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Kay Corporation's 5-year bonds yield 6.45% and 5 year T-bonds yield 4.80%. The real risk free rate is 3.00%, the inflation premium for 5-year
Kay Corporation's 5-year bonds yield 6.45% and 5 year T-bonds yield 4.80%. The real risk free rate is 3.00%, the inflation premium for 5-year bonds is IP 1.40%, the default risk premium for Kay's bonds is DRP-1.30% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP (t-1) x 0.1%, where t number of years to maturity. What is the liquidity premium (LP) on Kay's bonds? O. 0.65% Ob. 0.75% Oc. 0.35% Od. 1.65% Oc. 1.25%
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