Kop Corporation's 5-year bonds yield 6.80%, and T-bonds with the same maturity yield 5.15%. The...
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Kop Corporation's 5-year bonds yield 6.80%, and T-bonds with the same maturity yield 5.15%. The default risk premium for Kop's bonds is DRP -0.40%, the liquidity premium on Kop's bonds is LP = 1.25% versus zero on T-bonds, the inflation premium (IP) is 1.45%, and the maturity risk premium (MRP) on 5-year bonds is 0.40%. What is the real risk-free rate, r*? O a. 3,70% b.2.05 @ 4.75% d. 3.30% e. 2.90%
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