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Solomon Corporation's 5-year bonds yield 5.10% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds
Solomon Corporation's 5-year bonds yield 5.10% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the liquidity premium for Solomons bonds is LP = 0.5% versus zero for T-bonds, and the maturity risk premium for all bonds is 0.36%. What is the default risk premium (DRP) on Solomons bonds?
0.17%
0.20%
0.22%
0.24%
0.19%
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