Assume that for some period of time corporate bonds had an average rate of return of 5.4% while Treasury bills returned 2.8% and inflation averaged 2.7%. Given these assumptions, what is the risk premium on corporate bonds?
A) -0.1%
B) 0.1%
C) 2.6%
D) 2.7%
E) 2.8%
Correct Answer:
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