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Kern Corporation's 5-year bonds yield 7.10% and 5-year T-bonds yield 3.90%. The real risk-free rate...

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Accounting

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Kern Corporation's 5-year bonds yield 7.10% and 5-year T-bonds yield 3.90%. The real risk-free rate is r* = 2.58%, the default risk premium for Kern's bonds is DRP = 1.90% versus zero for T-bonds, the liquidity premium on Kern's bonds is LP=1.3%, 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 inflation premium (IP) on all 5-year bonds? 3

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