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= Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.70%. The real risk- free rate is r* = 2.5%, the default risk premium
= Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.70%. The real risk- free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.4% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds? = 0.74% 0.30% 0.55% 0.70% 1.10%
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