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l 10. Chapter MC, Section 06, Problem 069 Niendorf Corporation's 5-year bonds yield 7.75%, and 5-year T-bonds yield 4.80%. The real risk-free rate is re-
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10. Chapter MC, Section 06, Problem 069 Niendorf Corporation's 5-year bonds yield 7.75%, and 5-year T-bonds yield 4.80%. The real risk-free rate is re- 2.75%, the inflation premium for 5- year bonds is IP - 1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% 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 Niendorf's bonds? Oa. 2.10% Ob. 1.75% Oc. 1.56% Od. 1.42% Oe. 2.17% Step by Step Solution
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