If 15-year T-bonds have a yield of 6%, 15-year corporate bonds yield 8%, the maturity risk premium on all 15-year bonds is 1%, and corporate bonds have a 0.5% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? (hint: think about what cause the difference in the yields of the 15-year T-bonds and the 15-Year corporate bonds) A. 1.0% B. 0.5% C. 2.0% D. 0.6% E. 1.5%
If 15-year T-bonds have a yield of 6%, 15-year corporate bonds yield 8%, the maturity risk premium on all 15-year bonds is 1%, and corporate bonds have a 0.5% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? (hint: think about what cause the difference in the yields of the 15-year T-bonds and the 15-Year corporate bonds) A. 1.0% B. 0.5% C. 2.0% D. 0.6% E. 1.5%
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 15-year T-bonds have a yield of 6%, 15-year corporate bonds yield 8%, the maturity risk premium on all 15-year bonds is 1%, and corporate bonds have a 0.5% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? (hint: think about what cause the difference in the yields of the 15-year T-bonds and the 15-Year corporate bonds)
| A. |
1.0% |
|
| B. |
0.5% |
|
| C. |
2.0% |
|
| D. |
0.6% |
|
| E. |
1.5% |
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