Answer is 13.375%
Real Risk-free Rate = 0.250%
Inflation Premium = [2 * 1.00% + 14 * 2.00%] / 16
Inflation Premium = 30.00% / 16
Inflation Premium = 1.875%
Maturity Risk Premium = 0.000%
Liquidity Premium = 0.500%
Corporate Bond Yield = Real Risk-free Rate + Inflation Premium +
Maturity Risk Premium + Liquidity Premium + Default Risk
Premium
16.000% = 0.250% + 1.875% + 0.000% + 0.500% + Default Risk
Premium
16.000% = 2.625% + Default Risk Premium
Default Risk Premium = 13.375%
The real risk-free rate is 0.25%. Inflation is expected to average 1.0% a year for the...
The real risk-free rate, r*, is 1.5%. Inflation is expected to average 1.2% a year for the next 4 years, after which time inflation is expected to average 4.3% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 9.5%, which includes a liquidity premium of 0.7%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %
The real risk-free rate, r*, is 1.95%. Inflation is expected to average 2.9% a year for the next 4 years, after which time inflation is expected to average 3.75% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 8.95%, which includes a liquidity premium of 0.9%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places.
The real risk-free rate, r*, is 1.8%. Inflation is expected to average 3.5% a year for the next 4 years, after which time inflation is expected to average 4.65% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 9.15%, which includes a liquidity premium of 0.9%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places.
The real risk-free rate, r*, is 3%. Inflation is expected to average 2.75% a year for the next 4 years, after which time inflation is expected to average 4.05% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 9.15%, which includes a liquidity premium of 0.8%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places.
it is 4.2% eBook The real risk-free rate, is 1.5%. Inflation is expected to average 1.3% a year for the next 4 years, after which time inflation is expected to average 4.1 % a year. Assume that there is no maturity risk premium. A 9-year corporate bond has a yield of 11.2%, which includes a liquidity premium of 0,3% What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places
the real risk-free rate is 3%. inflation is expected to be 2% a year for 3 years, and then 4% a year thereafter. The maturity risk premium is 0.1(t-1)%, where t equals the maturity of the bond. That is, the maturity risk premium on a 5-year bond is 0.004 or 4%. A 5-year corporate bond has a yield of 8.4%. What is the yield on a 7-year corporate bond that has the same default risk and liquidity premiums as the...
The real risk-free rate of interest is expected to remain constant at 2.5%. The inflation rate is expected to be 3% (Year 1), 4.2% (Year 2), and 4.6% thereafter. The maturity risk premium (MRP) is equal to 0.079(t-1)%, where t-the bond's maturity. A 4-year corporate bond yields 8%, what is the yield on a 10-year corporate bond that has the default risk and liquidity premiums 1% higher than that of the 4-year corporate bond? The real risk-free rate of interest...
The real risk-free rate of interest is expected to remain constant at 4%. Inflation is expected to be 6% this year, 5% next year and 4% per year thereafter. The maturity risk premium (MRP) is equal to 0.1(t-1)%, where t = the bond’s maturity. A 5-year corporate bond yields 9%. What is the yield on a 10-year corporate bond that has the same default risk and liquidity premiums as the 5-year corporate bond?
The real risk-free rate of interest, is 3%, and it is expected to remain constant over time. Inflation is expected to be 2% per year for the next 3 years and 4% per year for the next 5 years. The maturity risk premium is equal to 0.1 x (t-1) %, where t = the bond’s maturity. The default risk premium for a BBB-rated bond is 1.3%. a- What is the average expected inflation rate over the next 4 years? b-What...
Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.50%, a maturity premium of 0.20% per year to maturity applies, i.e., MRP = 0.20%(t), where t is the number of years to maturity. Suppose also that a liquidity premium of 0.50% and a default risk premium of 2.70% applies to A-rated corporate bonds. What is the difference in the yields on a 5-year A-rated corporate bond and on a 10-year Treasury bond? Here we assume that...