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July 29, 2014

Homework Help: Economics

Posted by rok on Saturday, August 15, 2009 at 9:28am.

If 10-year T-bonds have a yield of 5.2%, 10-year corporate bonds yield 7.5%, the maturity risk premium on all 10-year bonds is 1.1%, and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?
a. 1.00%
b. 1.10%
c. 1.20%
d. 1.30%
e. 1.40%

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