A particular security's equilibrium rate of return is 10%. For all securities, the inflation premium is 2.00% and the risk free rate is 4.0%. The security's liquidity risk premium is 0.25% and maturity risk premium is 1.00%. The security has no special covenants. Calculate the security's default risk premium

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.