Keys Corporation's 5-year bonds yield 5.00% and 5-year T-bonds yield 4.00%. The real risk-free rate...
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Keys Corporation's 5-year bonds yield 5.00% and 5-year T-bonds yield 4.00%. The real risk-free rate is r* = 2.00%, the inflation premium for 5-year bonds i IP = 1.60%, the liquidity premium for Keys' bonds is LP = 0.50% versus zero for T-bonds, 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 default risk premium (DRP) on Keys' bonds? O a 1.00% b. 1.50% O c. 1.10% O d. 0.60% e. 0.50%
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