Homework Answers
Answer:
1) option B:2%
risk free rate = 3 month bond rate - inflation rate=5%-3%=2%
2) Option E:2.2%
Maturity Risk Premium = 30 yr bond interest rate -3 month intetest rate =7.2%-5%=2.2%
3) Option D:1.4%
Default Risk premium = 30 year corporate bond interest rate -30 year t bond interest rate =8.6%-7.2%=1.4%
4)Note : Marginal tax rate table is not provided.
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