Homework Answers
T -bond yield =5.30%
Corporate yield=6.75%
LP, corporate bond only=.25%
Default risk Premium = rCorp - rT-bond - LP
=6.75%-5.30%-.25%
Default risk Premium=1.20%
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Problem 3 suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%....
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%
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?
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 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%
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 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%
Niendorf Corporation's 5-year bonds yield 6.75%, and 5-year T-bonds yield 4.80%....continues
Niendorf Corporation's 5-year bonds yield 6.75%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP =1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP= (t - 1) ´ 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorf's 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.)
QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected...
QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 2.0% per year. What is the real risk-free rate of return, r"? 6.50% 5.00% 4 50% 4004 3.00% QUESTION 14 Suppose 10-year T-bonds have a yield of 4.00% and 10-year corporate bonds yield 6.50%. Also, corporate bonds have a 0.50% liquidity premium versus a zero iquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year...
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?
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%
QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 2.0% per year. What is the real risk-free rate of return, r"? 6.50% 5.00% 4 50% 4004 3.00% QUESTION 14 Suppose 10-year T-bonds have a yield of 4.00% and 10-year corporate bonds yield 6.50%. Also, corporate bonds have a 0.50% liquidity premium versus a zero iquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year...
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