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  3. niendorf corporations 5-year bonds yield 8.25%, an

Niendorf Corporations 5-year bonds yield 8.25%, and 5-year T-bonds yield 4.80%. The real risk-free rate...

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Accounting

Niendorf Corporations 5-year bonds yield 8.25%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Niendorfs bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t 1) 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorfs bonds? a. 2.5% b. 2.25% c. 2.72% d. 1.87% e. 2.54%

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