A particular securitys default risk premium is 6 percent, Financial Management

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A particular securitys default risk premium is 6 percent

A particular security's default risk premium is 6 percent. For all securities, the inflation risk premium is 3 percent and the real interest rate is 2.5 percent. The security's liquidity risk premium is 1 percent and maturity risk premium is 2 percent. The security has no special covenants. What is the security's equilibrium rate of return?

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Financial Management: A particular securitys default risk premium is 6 percent

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