Kelly Inc's 5-Year Bonds Yield 7

question 53

Multiple Choice

Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.90%.The real risk-free rate is r* = 2.5%,the default risk premium for Kelly's bonds is DRP = 0.40%,the liquidity premium on Kelly's bonds is LP = 2.2% versus zero on T-bonds,and the inflation premium (IP) is 1.5%.What is the maturity risk premium (MRP) on all 5-year bonds?

• A)0.73%
• B)0.81%
• C)0.90%
• D)0.99%
• E)1.09%

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Definitions:

Frequency Distribution

A summary of data showing the number (frequency) of observations falling within specified intervals.

Cumulative Frequency

The sum of the frequencies of all values at or below a certain point in a dataset or frequency distribution.

Bar Chart

A visual representation of data where each category is represented by a bar, whose length reflects the category's value.

Illustrating Data

The process of visually presenting data, often through charts, graphs, or diagrams, to help explain or understand patterns and relationships.