Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  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...

60.1K

Verified Solution

Question

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%

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students