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The real rate of return has been estimated to be 2 percent given current economic conditions. The 30-day risk-free rate (annualized) is 6 percent. Twenty-year
The real rate of return has been estimated to be 2 percent given current economic conditions. The 30-day risk-free rate (annualized) is 6 percent. Twenty-year U.S. government bonds currently yield 9 percent. The yield on 20-year bonds issued by the Forester Hoop Company is 15 percent. Investors require a 16 percent return on Forester's common stock. The common stock of Brown's Forensic Products has a required return of 12 percent. Compute and identify all meaningful risk premiums. Round your answers to the nearest whole number. Inflation premium Maturity risk: Default risk premium (Forester): Seniority risk premium (Forester common stock) What might account for the difference in the required returns for Brown versus Forester? Investors may require a -Select-rate of return on Brown's common stock compared to Forester's because Brown may have -Selectbusiness and/or financial risk than Forrester
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