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%
Yield on 10 year Corporate Bond = Yield on 10 year T Bond + Liquidity Premium + Default Risk Premium
Here, Maturity risk premium is not added as it is also with T bond
0.0665 = 0053 + 0.0025 + Default Risk Premium
Default Risk Premium = 0.0665 - 0.0025 - 0.053
Default Risk Premium = 0.011
Default Risk Premium = 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%
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?
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%
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%
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. 1.40% 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 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%
Crockett Corporation's 5-year bonds yield 6.65%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 3.60%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 0.90% 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 inflation premium (IP)...
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.)
A 5-year Treasury bond has a 4.35% yield. A 10-year Treasury bond yields 6.65%, and a 10-year corporate bond yields 8.65%. The market expects that inflation will average 2.7% over the next 10 years (IP10 = 2.7%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...