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Sami wants to earn a real return of 4.3 percent on any bond he acquires. The inflation rate is 2.6 percent. He has determined that
Sami wants to earn a real return of 4.3 percent on any bond he acquires. The inflation rate is 2.6 percent. He has determined that a particular bond he is considering should have an interest rate risk premium of .24 percent, a liquidity premium of .0625 percent, default risk premium of .12 percent, and a taxability premium of 1.62 percent. What nominal rate of return is Sami demanding from this particular bond?
Kindly show the formula used to further my understanding. Thank you in advance!
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