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Use the following information to calculate the interest rate on an eight-year bond just issued by Becher, Inc. Inflation: next 2 years = 2.5%; year
Use the following information to calculate the interest rate on an eight-year bond just issued by Becher, Inc. Inflation: next 2 years = 2.5%; year 3 and beyond = 4.5% Pure rate = 2.0%; Maturity risk premium m = zero for a 1-year maturity, increasing by .1% each year thereafter Default risk premium = 1.5% Liquidity risk premium = 0.0% for treasuries; 0.5% for Corporate bonds 7.7% 8.2% 8.7% 9.2% 9.9%
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