QUESTION $28$

$10$ points Save Answer

A particular security$\text{'}$s equilibrium rate of return is $8$ percent. For all securities$,$ the inflation risk premium is $1\mathrm{.}75$ percent and the real risk$-$

free rate is $3\mathrm{.}5$ percent. The security$\text{'}$s liquidity risk premium is $0\mathrm{.}25$ percent and maturity risk premium is $0\mathrm{.}85$ percent. The security has no

special covenants. Calculate the security$\text{'}$s default risk premium. $(10)$

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