Multiple Choice
Assume that the market thinks the real rate is 2.00%, the inflation premium is 2.70%, the bond's default risk justifies a premium of 2.10%, the maturity premium is 0.50%, and the liquidity premium is 1.10%. Since the cash flows are denominated in euros, the foreign-exchange rate premium is 1.50%. What is the discount rate?
A) 8.90%
B) 9.70%
C) 9.90%
D) None of these
Correct Answer:
Verified
Correct Answer:
Verified
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