What is the liquidity premium on bonds

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Niendorf Corporation's 5-year bonds yield 9.50%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) mc069-1.jpg 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorf's bonds?

Reference no: EM131045090

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