Question: If a 2-year Keys bond yields 12.5% and the default risk premium for Keys' bonds is 0.50%. What is the liquidity premium on Keys' bonds?

If a 2-year Keys bond yields 12.5% and the default risk premium for Keys' bonds is 0.50%. What is the liquidity premium on Keys' bonds?

Select one:

a. 1.5%

b. 19.5%

c. 3.5%

d. 0.5%

e. 1.0%

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