Compute the maturity risk premium

Reference no: EM1360352

Key's Corporation's 5 year bonds yield 6.50% and 5-year T-bonds yield 4.40%. The real risk free rate is r*=2.5%, the default risk premium for Key's bond is DRP = 0.40%, the liquidity premium on Keys bonds is LP = 1.7% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium on a 5-year bond?

Reference no: EM1360352

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