Homework Help: Investing

Posted by Alex on Wednesday, July 22, 2009 at 4:17pm.

Kelly Inc's 5 yr bond yield 7.50% and 5 yr T Bonds yield 4.50%.The risk free rate is r*=2.5, the default risk premium for kelly bonds is DRP=0.40%, the liquity premium on kelly's bond is LP=2.6% versus zero on T-bonds, and the inflation premium ( IP) is 1.5%. What is the Maturity risk premium( MRP) on all 5 yr bonds?

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