If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, the maturity risk...

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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 i

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Answer 1

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The corporate bond yield of 7.9% has 0.4% of liquidity premium and a percent of default risk premium. Since both the T bond and the corporate bonds have a maturity of 10 years, there is no risk premium in the yield of 7.9%.

The default risk premium = (7.9% - 0.4% - 6.2%) = 1.3% (opton b)

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Answer 2

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