Squire Inc

question 86

Multiple Choice

Squire Inc.'s 5-year bonds yield 6.75%,and 5-year T-bonds yield 4.80%.The real risk-free rate is r* = 2.75%,the inflation premium for 5-year bonds is IP = 1.65%,the default risk premium for Squire's bonds is DRP = 1.20% 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 liquidity premium (LP) on Squire's bonds?

• A) 0.49%
• B) 0.55%
• C) 0.61%
• D) 0.68%
• E) 0.75%

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Definitions:

Cost Of Living

The amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes, and healthcare.

Performance

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