What is the inflation premium

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Reference no: EM13105670

Crockett Corporation's 5-year bonds yield 6.85% as well as 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.80%, the default risk premium for Crockett's bonds is DRP = 0.85% versus zero for T-bonds the liquidity premium on Crockett's bonds is LP = 1.25% as well as the maturity risk premium for all bonds is found with the formula MRP = (t1) x 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on 5-year bonds?

Reference no: EM13105670

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