NikkiG's Corporation's 10-year bonds are currently yielding a return of 6.25 percent. The expected inflation premium is 1.20 percent annually and the real risk-free rate is expected to be 2.50 percent annually over the next ten years. The liquidity risk premium on NikkiG's bonds is 0.45 percent. The maturity risk premium is 0.30 percent on 2-year securities and increases by 0.07 percent for each additional year to maturity. Calculate the default risk premium on NikkiG's 10-year bonds. Note: Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Default risk premium %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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NikkiG's Corporation's 10-year bonds are currently yielding a return of 6.25 percent. The expected inflation premium is 1.20 percent
annually and the real risk-free rate is expected to be 2.50 percent annually over the next ten years. The liquidity risk premium on
NikkiG's bonds is 0.45 percent. The maturity risk premium is 0.30 percent on 2-year securities and increases by 0.07 percent for each
additional year to maturity. Calculate the default risk premium on NikkiG's 10-year bonds.
Note: Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).
Default risk premium
%
Transcribed Image Text:NikkiG's Corporation's 10-year bonds are currently yielding a return of 6.25 percent. The expected inflation premium is 1.20 percent annually and the real risk-free rate is expected to be 2.50 percent annually over the next ten years. The liquidity risk premium on NikkiG's bonds is 0.45 percent. The maturity risk premium is 0.30 percent on 2-year securities and increases by 0.07 percent for each additional year to maturity. Calculate the default risk premium on NikkiG's 10-year bonds. Note: Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Default risk premium %
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