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Determine the risk premium demanded by investors

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Question - The Sunny Inc. bond is currently trading at $1020. This bond has a maturity of 4 years and a face value of $1,000. It offers an annual coupon rate of 5.25% paid semi-annually. The risk-free rate is 0.5%.

Required -

a. Determine the rate of return on the bond.

b. Determine the risk premium demanded by investors.

c. Determine if the Sunny Inc. bond is at a discount or a premium.

Reference no: EM133169970

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