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For this answer we have to know the six categories of premioum:
a. Inflation premium(more risk): high inflation means tha investors will require a higher return in order to invest at a certain project.
b. Maturity premium: the longer the duration of a project, the higher the return that investors will require.
c. Liquidity premium: the excess return that investors will require in order to invest their capital in a less desirable project on a secondary market.
d. Exchange rate risk premium: the excess return that investors will require in order to invest their capital in a foreign financial assets that has volatile exchange rate.
e. default risk premium: .... in order to invest in a more (??) project to default company
f. Real rate of interests

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โˆ™ 2009-12-09 14:49:15
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Q: What is the difference between discount rate and coupon rate?
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