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What is the drp on a 20 year loan to yubaba inc

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Reference no: EM132035706

You are given the following information:

  • r* = 1.5%
  • Investors expect inflation to average 3% per year into the foreseeable future
  • The MRP on 200 year bonds = 2%
  • The LP on U.S. and Yubaba Inc. bonds = 0
  • The interest rate on a 20 year loan to Yubaba Inc. is 1.25 times the rate on a 20 year loan to the U.S. government.

What is the DRP on a 20 year loan to Yubaba Inc.

Reference no: EM132035706

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