What rate of interest should the u.s. corporate bond pay

Reference no: EM13297400

You are considering an investment in a U.S. corporation bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%; inflation is expected to be 2.0%; the maturity risk premium is 1.5%; and the default risk premium for AAA rated corporate bond is 3%. What rate of interest should the U.S. corporate bond pay?

Reference no: EM13297400

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