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    Maturity Risk Premium

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    Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 5.80%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 1.3% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?
    1.80%
    2.03%
    1.60%
    1.37%
    2.07%

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    https://brainmass.com/business/finance/maturity-risk-premium-307739

    Solution Summary

    The solution explains how to calculate the maturity risk premium

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