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Please show me to how to solve using step by step instructions. Thank you Keys Corporation's 5-year bonds yield 6.50%, and 5-year T-bonds yield 4.40%.
Please show me to how to solve using step by step instructions. Thank you
Keys Corporation's 5-year bonds yield 6.50%, and 5-year T-bonds yield 4.40%. The return rate on TIP is 2.5%, the inflation premium for 5 years bonds is IP = 1.50%, the default risk premium for Keys' bonds is DRP-0.50% 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? a) 1.30% b) 1.40% c) 1.50% d) 1.60% e) 1.70%Step by Step Solution
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