If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, the maturity risk...
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, 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? a. 1.40% b. 1.46% c. 1.60% d. 1.30% e. 1.51%
Homework Answers
| Liquidity risk premium (LP) | 0.40% | ||
| Corporate bond yield (CY) | 7.90% | ||
| Treasury bond yield (TY) | 6.20% | ||
| Deafult risk premium | (CY-TY) - LP | ||
| Deafult risk premium | (7.90%-6.20%)-0.40% | ||
| Deafult risk premium | (1.70%-0.40%) | ||
| Deafult risk premium | 1.30% | ||
| Thus, default risk premium on corporate bond is 1.30% | |||
Add Answer to:
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds
yield 7.9%, the maturity risk...
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, the maturity risk...
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, 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? a. 1.51% b. 1.30% C. 1.60% d. 1.46% e. 1.40%
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 10%, the maturity risk...
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 10%, 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? Select the correct answer. a. 2.65% b. 2.90% c. 3.40% d. 2.40% e. 3.15%
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 pr
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%
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 6.2% annual coupon bonds at their...
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 6.2% annual coupon bonds at their par value of $1,000. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity? $__________ If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 10.6%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus...
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.65%. Also, corporate...
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.65%. 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? Select one: a. 1.20% b. 1.34% c. 1.22% d. 0.86% e. 1.10%
Problem 3 suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%....
Problem 3 suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. 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 l. 15% what is the default risk premium on corporate bonds?
Suppose 10-year T-bonds have a yield of 5-30% and 10-year corporate bonds yield 6.65%. Also, corporate...
Suppose 10-year T-bonds have a yield of 5-30% and 10-year corporate bonds yield 6.65%. 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 O corporate bonds? o a. 1.20% b. 1.22% c.0.86% O d. 1.10% 134%
20. Suppose 10-year corporate bonds have a yield of 8%, and 10-year T-bonds yield 5%. The...
20. Suppose 10-year corporate bonds have a yield of 8%, and 10-year T-bonds yield 5%. The real risk-free rate is r* 1.80%, the inflation premium for 10-year bonds is IP = 2%, the default risk premium for corporate bonds is DRP -1% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP -(t-1) * 0.1%, wheret - number of years to maturity. What is the liquidity premium (LP) on corporate bonds?
10-year Treasury bond has a yield of 4.3%, and a Billy Bob, Inc. corporate bond yields...
10-year Treasury bond has a yield of 4.3%, and a Billy Bob, Inc. corporate bond yields 7.9%. The maturity risk premium on all 10-year bonds is 1.1%, and corporate bonds have a .5% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the Billy Bob, Inc. corporate bond? (Answer to the nearest basis point in a % format, x.xx, with no % sign needed.)
2. A bond matures in 7 years, has a par value of $1,000, and an annual...
2. A bond matures in 7 years, has a par value of $1,000, and an annual coupon payment of $70. Investors require a return of 8.5%. Calculate the price of the bond. [8 points] 3. A bond is priced at $1,280, has a par value of $1,000, 15 years to maturity, and a $135 annual coupon. The bond is callable in 5 years at $1,050. Calculate the yield to call. [8 points] 4. If 10-year Treasury bonds yield 6.2%, 10-year...
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, 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? a. 1.51% b. 1.30% C. 1.60% d. 1.46% e. 1.40%
Problem 3 suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. 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 l. 15% what is the default risk premium on corporate bonds?
Suppose 10-year T-bonds have a yield of 5-30% and 10-year corporate bonds yield 6.65%. 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 O corporate bonds? o a. 1.20% b. 1.22% c.0.86% O d. 1.10% 134%
20. Suppose 10-year corporate bonds have a yield of 8%, and 10-year T-bonds yield 5%. The real risk-free rate is r* 1.80%, the inflation premium for 10-year bonds is IP = 2%, the default risk premium for corporate bonds is DRP -1% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP -(t-1) * 0.1%, wheret - number of years to maturity. What is the liquidity premium (LP) on corporate bonds?
2. A bond matures in 7 years, has a par value of $1,000, and an annual coupon payment of $70. Investors require a return of 8.5%. Calculate the price of the bond. [8 points] 3. A bond is priced at $1,280, has a par value of $1,000, 15 years to maturity, and a $135 annual coupon. The bond is callable in 5 years at $1,050. Calculate the yield to call. [8 points] 4. If 10-year Treasury bonds yield 6.2%, 10-year...
Most questions answered within 3 hours.
-
Calculate the change in the Gibbs energy of the system for the
following processes: a) 6.0...
asked 1 minute ago -
A solution is prepared by dissolving 11.60 g of a mixture of
sodium carbonate and sodium...
asked 10 minutes ago -
1. Mini Case Study: Suppose that, in the future, most jobs will
be bid upon by...
asked 12 minutes ago -
After reading the Primary Care scenario in the Allied Health
Community, what could have been implemented...
asked 5 minutes ago -
Plantinga argues for the view that there is no solution to the
problem of moral evil....
asked 8 minutes ago -
For this Discussion, you examine a case study of
hearing-impaired children who developed their own language...
asked 13 minutes ago -
At the beginning of the year, Palermo Brothers, Inc., purchased
a new plastic water bottle making...
asked 11 minutes ago -
You could argue that even though Rockefeller clearly had
enormous market power (90% of the market)...
asked 12 minutes ago -
The moment of inertia of a disk rotating about its axis of
symmetry is Icm=1/2MR^2
The...
asked 19 minutes ago -
When using a relational database what makes data
formatting so important and critical to the functions...
asked 30 minutes ago -
The following temperatures show the (fictional) daily low
measured at O'Hare airport every January 1st from...
asked 50 minutes ago -
Your friend is interested in the characteristics of fast tree
planters. He searched through the records...
asked 58 minutes ago