Homework Answers
Default risk premium = 2%
Inflation risk premium = 1.75%
Real risk-free rate = 1.50%
Liquidity risk premium = 0.25%
Maturity risk premium = 0.85%
Equilibrium rate of return = 2% + 1.75% + 1.50% + 0.25% + 0.85%
Equilibrium rate of return = 6.35%
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