Stu wants to earn a real return of 34 percent on any bond, Financial Management

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Stu wants to earn a real return of 34 percent on any bond

Stu wants to earn a real return of 3.4 percent on any bond he acquires. The inflation rate is 2.8 percent. He has determined that a particular bond he is considering should have an interest rate risk premium of .27 percent, a liquidity premium of .08 percent, and a taxability premium of 1.69 percent. What nominal rate of return is Stu demanding from this particular bond?

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Financial Management: Stu wants to earn a real return of 34 percent on any bond

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