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7nadin3 [17]
3 years ago
14

1-year Treasury bill yield is 3.5%. 10-year Treasury bond yield is 4.5%. Expected rate of inflation embedded in both the Treasur

y bill and bond is 2.0%. Average yield on AAA-rated 10-year corporate bonds is 5.75%. Average yield on BB-rated 10-year corporate bonds is 8%. Liquidity premium on both Treasury bill and bond is zero. Liquidity premium on both AAA-rated and BB-rated bonds are 0.5%. What is the maturity risk premium embedded in the 10-year Treasury bond
Business
1 answer:
garik1379 [7]3 years ago
6 0

Answer: 2.5%

Explanation:

Treasury bonds have no default risk as they are backed by the U.S. government. The premiums that make up the yield are the inflation, liquidity and maturity risk premiums.

Required yield on Treasury bond = Inflation premium + Liquidity premium + Maturity risk premium

4.5% = 2% + 0% + Maturity risk premium

MRP = 4.5% - 2% - 0%

= 2.5%

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Answer:

Answer for the question:

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3 years ago
Assume that we are in the MM world. The beta of an all-equity firm is 1.4. Suppose the firm changes its capital structure to 40
balu736 [363]

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2.3

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8 0
3 years ago
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sp2606 [1]

Answer:

Attrition

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The right answer to the question is attrition and what is attrition in business sense: is simply means a situation where organization staff strength gradually and deliberately reduces as employees retire or resign and are not replaced.

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yanalaym [24]

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