Lender expect the inflation rate to be in the loans second

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Reference no: EM1314824

Q. Marshall Manufacturing has immediately borrowed money at 13.5percent (%) for 2 yrs. The pure rate of interest is 2percent (%). Marshall's default risk premium is 4percent (%), its liquidity risk premium is 2percent (%) also its maturity risk premium is .5percent (%). Inflation is expected to be 3percent (%) during the first yr of the loan's life. Illustrate what does the lender expect the inflation rate to be in the loan's second yr?

Reference no: EM1314824

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