Problem:
A particular security's default risk premium is 3 percent. For all securities, the inflation risk premium is 2.85 percent and the real risk-free rate is 5.70 percent. The security's liquidity risk premium is 0.15 percent and maturity risk premium is 0.75 percent. The security has no special covenants.
Required:
Question: Calculate the security's equilibrium rate of return.
Note: Be sure to show how you arrived at your answer.