If the yield to maturity on a Treasury bond is 2% and the risk premium on...
If the yield to maturity on a Treasury bond is 2% and the risk premium on a corresponding corporate bond is 33 basis points, then the yield to maturity on the corporate bond must be
a)2.66%
b)2.33%
c)2.0033%
d)1.67%
Homework Answers
| YTD on Treasury Bond | 2.00% | (Risk Free Return) | ||
| Add: Risk Premium on Corporate Bonds | 0.33% | (Premium above Risk free) | ||
| YTD on Corporate Bonds | 2.33% | |||
| Answer is B | ||||
| Return over and above Risk Free Return is known as Risk Premium | ||||
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