Solved

Niendorf Corporation's 5-Year Bonds Yield 8

Question 27

Multiple Choice

Niendorf Corporation's 5-year bonds yield 8.00%,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 Niendorf's 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 Niendorf's bonds?


A) 1.31%
B) 1.46%
C) 1.62%
D) 1.80%
E) 2.00%

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q22: Kop Corporation's 5-year bonds yield 6.50%,and T-bonds

Q23: In the foreseeable future,the real risk-free rate

Q25: Interest rates are important in finance, and

Q26: 5-year Treasury bonds yield 5.5%.The inflation premium

Q29: Interest rates are important in finance, and

Q30: Which of the following would be most

Q31: Suppose the real risk-free rate is 3.50%,the

Q32: Suppose the real risk-free rate is 3.25%,the

Q42: Suppose the U.S.Treasury issued $50 billion of

Q87: If 10-year T-bonds have a yield of