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Keys Corporation's 5-year bonds yield 6, and S-year T-bonds yield 4%. The real risk-free rate is ri= 2.2%, the inflation premium for 5 years bonds
Keys Corporation's 5-year bonds yield 6, and S-year T-bonds yield 4%. The real risk-free rate is ri= 2.2%, the inflation premium for 5 years bonds is VP = 1.4%, the default risk premium for Keys bonds is DRP = 0.44% versus zero for T-bonds, 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 liquidity premium (LP) on Keys bonds? 15196 O 1.66% 0 1.5696 O 1.7196 0 1.61%
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