Problem:
A particular security's default risk premium is 5 percent. For all securities, the inflation risk premium is 4 percent and the real interest rate is 3 percent. The security's liquidity risk premium is 1 percent and maturity risk premium is 2 percent. The security has no special covenants.
Required:
Question: What is the security's equilibrium rate of return?
Note: Please show how you came up with the solution.