A Treasury bond that matures in 10 years has a yield of 4.50%. A 10-year corporate bond has a yield of 7.25%. Assume that the liquidity premium on the corporate bond is 0.40%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. %

A Treasury bond that matures in 10 years has a yield of 4.50%. A 10-year corporate bond has a yield of 7.25%. Assume that the liquidity premium on the corporate bond is 0.40%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. %

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 5P: Default Risk Premium A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate...

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Question

A Treasury bond that matures in 10 years has a yield of 4.50%. A 10-year corporate bond has a yield of 7.25%. Assume
that the liquidity premium on the corporate bond is 0.40%. What is the default risk premium on the corporate bond?
Round your answer to two decimal places.
%

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