Suppose the real risk - free rate is 3 . 5 0 % , the average future
Fantastic news! We've Found the answer you've been seeking!
Question:
Suppose the real riskfree rate is the average future inflation rate is a maturity premium of per year to maturity applies, ie MRP t where t is the number of years to maturity. Suppose also that a liquidity premium of and a default risk premium of applies to Arated corporate bonds. What is the difference in the yields on a year Arated corporate bond and on a year Treasury bond? Here we assume that the pure expectations theory is NOT valid, and disregard any crossproduct terms, ie if averaging is required, use the arithmetic average.
Related Book For
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair
Posted Date: