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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Pollo Inc.'s 8.25% bonds have a YTM of 10.00%.
The estimated risk premium between the
company's bonds and stocks is 3%. Pollo's cost
of common equity, Re, is
%.
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- Subject:- financearrow_forwardPollo Inc.'s 5.34% bonds have a YTM of 8.33%. The estimated risk premium between the company's bonds and stocks is 6%. Pollo's cost of common equity, Re, is ____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.arrow_forwardInc.'s 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.6%. The real risk-freerate is 2.75%, the default risk premium for Crockett's bonds is DRP = 1.35% versus zero for T-bonds, theliquidity premium on Crockett's bonds is LP = 0.90% versus zero for T-bonds, and the maturity riskpremium for all bonds is found with the formula MRP = (t – 1) × 0.1%, where t = number of years tomaturity. What inflation premium (IP) is built into 5-year bond yields?arrow_forward
- Kern Corporation's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.30%. The real risk-free rate is r* = 2.5%, the default risk premium for Kern's bonds is DRP = 1.90% versus zero for T-bonds, the liquidity premium on Kern's bonds is LP = 1.3%, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) × 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on all 5-year bonds?arrow_forwardKoy Corporation's 5-year bonds yield 8.15%, and 5-year T-bonds yield 4.90%. The real risk-free rate is r* = 3.10%, the inflation premium for 5-year bonds is IP=1.40%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP=(t-1) x 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? Not Answered 4.00% b O Ob. 3.25% 3 O Oc2.10% O d. 2.85% O e 2.50%arrow_forwardKoy Corporation's 5-year bonds yield 7%, and 5-Year T-bonds yield 5.15%. The real risk-free rate is r*=3%, the inflation premium for 5=year bonds is IP=1.75%, the liquidity premium for Koy s bonds is LP=.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP=(t-1)*.1%, where t=number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? B. 6.6 is the answer. Pls this ans should match.arrow_forward
- Kern Corporation's 5-year bonds yield 8.10% and 5-year T-bonds yield 4.90%. The real risk-free rate is r* = 2.40%, the default risk premium for Kern's bonds is DRP = 1.90% versus zero for T-bonds, the liquidity premium on Kern's bonds is LP = 1.30%, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) × 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on all 5-year bonds? a. 2.60% b. 0.60% c. 2.05% d. 1.90% e. 2.10% Please answer fast I give you upvotearrow_forwardKop Corporation's 5-year bonds yield 6.50%, and T-bonds with the same maturity yield 4.40%. The default risk premium for Kop's bonds is DRP = 0.40%, the liquidity premium on Kop's bonds is LP 1.70% versus zero on T-bonds, the inflation premium (IP) is 1.50%, and the maturity risk premium (MRP) on 5-year bonds is o.40%. What is the real risk-free rate, r*? I=arrow_forwardKelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. 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 = 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-year bonds?Answer 0.38%0.50%0.40%0.59%0.56%arrow_forward
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