Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.90%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10- year bonds is 1.15%. What is the default risk premium on corporate bonds? А) 3.08% в) 3.35% c) 2.95% D 4.12% E) 3.12%
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.90%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10- year bonds is 1.15%. What is the default risk premium on corporate bonds? А) 3.08% в) 3.35% c) 2.95% D 4.12% E) 3.12%
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 14MC
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![Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.90%. Also, corporate bonds have a 0.25%
liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-
year bonds is 1.15%. What is the default risk premium on corporate bonds?
A) 3.08%
B) 3.35%
2.95%
D) 4.12%
E) 3.12%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffb9455e9-1b75-42ab-87bf-b8a6d9f2482d%2Ff154e3ca-0c4f-4295-ac9f-f3ff923034e1%2Fmd72nut_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.90%. Also, corporate bonds have a 0.25%
liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-
year bonds is 1.15%. What is the default risk premium on corporate bonds?
A) 3.08%
B) 3.35%
2.95%
D) 4.12%
E) 3.12%
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