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Your uncle is a a banker and he informed you the following information. A 5-year corporate bond has a yield of 15.35%; and a 5-year
Your uncle is a a banker and he informed you the following information. A 5-year corporate bond has a yield of 15.35%; and a 5-year Treasury bond has a yield of 5.7%;Inflation is expected to be 3% this year and 2.4% during the next four years. Assuming that maturity risk premium is the same for all long-term securities. Default risk for corporate bonds is 1.58%. What should be liquidity premium of this 5-year corporate bond? (Note, if your answer is 12.34%, just enter your answer as 12.34)
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