T6

Bling Corporation's 7 -year bonds yield 7.75%, and T-bonds with the same maturity yield 2.50%. The default risk premium for Bling's bonds is DRP =4%, the liquidity premium on Bling's bonds is LP=1.25% versus zero on T-bonds, the inflation premium (IP) is 2.40%, and the maturity risk premium (MRP) on 7 -year bonds is 0.60%. What is the real risk-free rate, r ? 0.70%0.50%0.50%0.70%4.30%