Suppose 10-year bonds issued by thepremium versus a zero liquidity premium for the &i government bonds. And the maturity risk premium on both 10-year bonds is 1.15%. What is the default risk premiumon Zai bonds?government have a yield of 5.78% and Zan 10-year bonds have a yield of 8.78%. Also, Zgi bonds have a 0.85% liquidityDefault risk premium on Zai bonds is% (use 2 decimals)

Current Yield Za 10 year bond = Yield on Government bond + Liquidity Premium + Default Risk Premium…

Suppose 10-year bonds issued by the government have a yield of 5.78% and Zan 10-year bonds have a yield of 8.78%. Also, Zgi bonds have a 0.85% liquidity premium versus a zero liquidity premium for the&ali government bonds. And the maturity risk premium on both 10-year bonds is 1.15%. What is the default risk premium on Za bonds? Default risk premium on Zain bonds is % (use 2 decimals)

Suppose 10-year bonds issued by the government have a yield of 5.78% and Zan 10-year bonds have a yield of 8.78%. Also, Zgi bonds have a 0.85% liquidity premium versus a zero liquidity premium for the&ali government bonds. And the maturity risk premium on both 10-year bonds is 1.15%. What is the default risk premium on Za bonds? Default risk premium on Zain bonds is % (use 2 decimals)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 17PROB

See similar textbooks

Similar questions

If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9.2%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?
If 10-year Treasury bonds have a yield of 4.3%, 10-year corporate bonds yield 6.7%, the maturity risk premium on all 10-year bonds is same, and corporate bonds have a 0.3% liquidity premium vs. a zero liquidity premium for T-bonds,what is the default risk premium on the corporate bond?
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%
Currently, a one-year Treasury bill is yielding 3.8 percent. Company F's three-year bond has a yield equal to 5.1 percent, and its seven-year bond has a yield equal to 5.9 percent. Although none of the bonds has a liquidity premium, any bond with a maturity equal to one year or longer has a maturity risk premium (MRP). Except for their terms to maturity, the characteristics of the bonds are the same. Compute the annual MRP associated with the bonds. Round your answer to one decimal place. % Compute the default risk premium (DRP) associated with the bonds. Round your answer to one decimal place. %
A company's 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk free rate (r*) is 2.3%. The average inflation premuim is 2.5% and the maturity risk premium is estimated to be 0.1X(t-1) % where t= the number of maturity. If the iquidity premium is 1% what is the default risk premium on the corporate bonds.? Please show formula and calculation. Do it in manual computation not in spreadsheet.
If 8-year T-bonds have a yield of 6.36%, 8-year corporate bonds yield 8.36%, the maturity risk premium on all 8-year bonds is 1.22%, and corporate bonds have a 0.35% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Group of answer choices 1.77% 1.75% 1.80% 1.65% 1.62%
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.50%. 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? 3.33 % 2.95% 2.92% 2.68 % 2.86 %
Koy Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t − 1) × 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds?
a. Assuming the bonds will be rated AA, what will the price of the AA-rated bonds be? b. How much total principal amount of these bonds must HMK issue to raise $9million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume all fractions are rounded to the nearest whole number.) c. What must the rating of the bonds be for them to sell at par? d. Suppose that when the bonds are issued, the price of each bond is $970.43. What is the likely rating of the bonds?Are they junk bonds? Note: Assume annual compounding.
Dakota Corporation I5-year bonds have an equilibrium rate of return of 8 percent For all securities, the inflation risk premium is 1.75percent and the real interest rate is 3.50 percent The security's liquidity risk premium is 0.25 percent and maturity risk premium is O.85 percent The security has no special covenants Calculate the bond's default risk premium.
The Wall Street Journal reports that the current rate on 8-year Treasury bonds is 5.85 percent, the rate on a 15-year Treasury bond is 6.25 percent, and the rate on a 15-year corporate bond issued by MHM Corp. is 7.35 percent. Assume that the maturity risk premium is zero. If the default risk premium and the liquidity risk premium on the 8-year corporate bond issued by MHM Corp. are the same as those on the 15-year corporate bond, calculate the current rate on MHM Corp.'s 8-year corporate bond.
With an assumption of annual compounding, Frey, Inc. bond is a 5.00%, 15-year bond priced to yield 8.00%. The Janis Marion Incorporated bond is a 7.50%, 20-year bond priced to yield 6.00%. Two bonds have par values of PhP1,000. Which of these has a lesser price?