Question: A particular securitys default risk premium is 2 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is

A particular securitys default risk premium is 2 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is 3.5 percent. The securitys liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calcu-late the securitys equilibrium rate of return. (LG6-4)

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