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
a. 1.00%
b. 1.10%
c. 1.20%
d. 1.30%
e. 1.40%
Homework Answers
(Points: 4)
1.00%
1.10%
1.20%
1.30%
1.40%
r=2.3+drp+0.2+1.1
r=drp+3.6
drp=r-3.6
drp=2.3-3.6=1.3
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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
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