eBook A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 4.2% per year, and the real risk-free rate (r*) is 2.35%. The average inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1 x (t-1) %, where t = number of years to maturity. If the liquidity premium is 0.8%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places. BO %
eBook A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 4.2% per year, and the real risk-free rate (r*) is 2.35%. The average inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1 x (t-1) %, where t = number of years to maturity. If the liquidity premium is 0.8%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places. BO %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 4.2% per year, and the real risk-free rate (r*) is 2.35%. The average
inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1 x (t-1) %, where t = number of years to maturity. If the liquidity premium is 0.8%, what is the
default risk premium on the corporate bonds? Round your answer to two decimal places.
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F37e2f913-30b2-4c8c-98d5-339163057ff1%2Fbf2f9b88-1efb-4456-9e99-001ece3eb354%2Ftdng4fa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:eBook
A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 4.2% per year, and the real risk-free rate (r*) is 2.35%. The average
inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1 x (t-1) %, where t = number of years to maturity. If the liquidity premium is 0.8%, what is the
default risk premium on the corporate bonds? Round your answer to two decimal places.
%
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