Determine what is the risk-free rate

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Reference no: EM132077513

Question: Sandino Corporation's 10-year, semiannual bond is currently selling at $850, with a coupon rate of 5% and a nominal rate (YTM) of 7.12%. Given an annual maturity risk premium (MRP) of (t-1)*0.10%, the bond's liquidity premium (LP) of 0.40% and default risk premium (DRP) of 3.40%, what is the risk-free (r_RF) rate? Your answer should be between 1.80 and 3.58, rounded to 2 decimal places, with no special characters.

Reference no: EM132077513

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