# Kelly incs 5 year bonds yield 750 and 5 year t bonds

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7. Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.90%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.2% versus zero on T-bonds , and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?
Chapter 7 1. A 15-year bond with a face value of \$1,000 currently sells for \$850. Which of the following statements is CORRECT?
2. A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Neither is callable, and both have the same yield to maturity. If the yield to maturity of both bonds increases by the same amount, which of the following statements would be CORRECT?
3. If its yield to maturity declined by 1%, which of the following bonds would have the largest percentage increase in value? a. A 1-year zero coupon bond. b. A 1-year bond with an 8% coupon. c. A 10-year bond with an 8% coupon. d. A 10-year bond with a 12% coupon. e. A 10-year zero coupon bond. e