If 10-year T-bonds have a yield of 7.2%, 10-year corporate bonds yield 10.1%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? a. 2.50% b. 3.30% c. 2.90% d. 1.20% e. 5.90%
If 10-year T-bonds have a yield of 7.2%, 10-year corporate bonds yield 10.1%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? a. 2.50% b. 3.30% c. 2.90% d. 1.20% e. 5.90%
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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If 10-year T-bonds have a yield of 7.2%, 10-year corporate bonds yield 10.1%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?
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