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Squire Inc.'s 23-year bonds yield 9.54%, and 5-year T-bonds yield 5.02%. The real risk-free rate is r* = 2.12%, the inflation premium for 5-year bonds
Squire Inc.'s 23-year bonds yield 9.54%, and 5-year T-bonds yield 5.02%. The real risk-free rate is r* = 2.12%, the inflation premium for 5-year bonds is IP = 1.7%, the default risk premium for Squire's bonds is DRP = 1.24% 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 Squire's bonds in percent?
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