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QUESTION
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 11.8%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate...
16.
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 11.8%, 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. 5.34%b. 5.48%c. 5.20%d. 5.62%e. 5.76%
