What pure interest rate is implied by assumptions

Assignment Help Financial Management

Reference no: EM131297545

The Habender Company just issued a two-year bond at 12%. Inflation is expected to be 5% next year and 6% the year after. Habender estimates its default risk premium at about 1.5% and its maturity risk premium at about 0.5%. Because it's a relatively small and unknown firm, its liquidity risk premium is about 2.1% even on relatively short debt like this. What pure interest rate is implied by these assumptions? Round your answer to one decimal place.

%________________

Reference no: EM131297545

Questions Cloud

What are the advantages and disadvantages of outsourcing : What are the advantages and disadvantages of outsourcing? What is deintegration? How can it benefit a manufacturer?

Calculate the noise margin and output capacity : Whats the role of each transistor - calculate the noise margin and Output Capacity - if output resistance would be 50 ohm and the capacitor capacity would be 100 nano farad;

Describe the key elements of the medicare cost report : Describe the key elements of the Medicare cost report. Why is this report so important for hospital net revenues? Your response must be at least 200 words in length.

Find the defect density and plot yield as a function of s : Using the simple Poisson model, find the defect density (in the good area of the wafer) and plot the yield as a function of S, where S is the square root of the area of the die in production. Plot the total and the good die per wafer as a function..

What pure interest rate is implied by assumptions : The Habender Company just issued a two-year bond at 12%. Inflation is expected to be 5% next year and 6% the year after. Habender estimates its default risk premium at about 1.5% and its maturity risk premium at about 0.5%. Because it's a relatively ..

What is production scheduling : What is production scheduling? Why is a production schedule so important for a manager? Define PERT.- Explain what steps are involved with PERT.

How vision and values guide divisions strategic direction : Summarize how the vision, mission, and values guide the division's strategic direction. Define your guiding principles and values for your division in the context of culture, social responsibility, and ethics.

Define downsizing and restructuring : Briefly summarize the methods used by firms to improve production efficiency? Define downsizing and restructuring.- How are the two related?

Provide a brief description of the business visited : It is recommended you visit a relative small but active business operation for this research. A company with 50 to 100 employees can be better evaluated than a large corporation with many different work centers employing thousands of workers. Yo..

User Account

All Pages