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petergreeker petergreeker
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3 years ago
Tootsie Roll Industries' 10-year bonds are priced to yield 7%. Economists predict that real rates and inflation will remain constant over the next ten years at 3% and 2%, respectively. Bond analysts estimate that the maturity risk premium for a 10-year maturity is 0.25% and that the liquidity risk premium for Tootsie's bond is 0.50%. What is the default risk premium for Tootsie's bond?

▸ 0.94%

▸ 0.99%

▸ 1.00%

▸ 1.09%

▸ 1.19%
Textbook 
Corporate Finance Online

Corporate Finance Online


Edition: 2nd
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Jose^2Jose^2
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3 years ago
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