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Default Risk Premium
A company's 5-year bonds are yielding 9.6% per year. Treasury bonds with the same maturity are yielding 5.3% per year, and the real risk-free rate (r*) is 2.25%. The average inflation premium is 2.65%, and the maturity risk premium is estimated to be 0.1(t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.9%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
____ %
Maturity Risk Premium
An investor in Treasury securities expects inflation to be 2.3% in Year 1, 2.75% in Year 2, and 4.25% each year thereafter. Assume that the real risk-free rate is 1.5%, and that this rate will remain constant. Three-year Treasury securities yield 6.45%, while 5-year Treasury securities yield 8.10%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP3? Round your answer to two decimal places.
Given the market rate of interest of 3.56 percent, what is the market value of the bond?
What DCR is the lender effectively applying to the borrower?
Calculate and report the cost of the options, including the opportunity cost. Calculate IBM’s total dollar proceeds and effective ex-rate in one year for the following spot ex-rates in one year: $1.5800/£, $1.5500/£, $1.5000/£ and $1.4750/£ (in that ..
The expected returns from the securities are 8% and 12%. The volatility of the first security is 15%. The instantaneous risk-free rate is 4%. What is the volatility of the second security?
Is Maslow's hierarchy of needs useful to managers? Why or Why not? Describe your maturity level according to Argyris' maturity-immaturity continuum. What insights about your human needs does this description give you? What is the difference between f..
What is the standard deviation of the rate of return on this investment?
If a bond is selling on the open market at $960 is it selling at a premium or discount? List 2 factors that might contribute to this selling price. What is the value today of a bond with the below attributes? What is the value of $50,000 invested at ..
Suppose your portfolio mirrors S&P500 index and is valued currently at $1,000,000. The S&P 500 index is currently at 2,000. What action is needed to provide protection against the value of the portfolio falling below $950,000 in 6 months?
We are evaluating a project that costs $1074790, has a seven-year life, What is the NPV of the project in worst-case scenario?
Assume no other activities occurred during the year. What was the net in one amount for the year?
Find the after-tax return to a corporation that buys a share of preferred stock at $49, sells it at year-end at $49, and receives a $4 year-end dividend. The firm is in the 30% tax bracket.
Should the firm conduct customer segment research or go directly to market?
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