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%
Homework Answers
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%
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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...
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%....
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?
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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...
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