A companys 5-year bonds are yielding 97 per year treasury, Ask an Expert

Economics

A company's 5-year bonds are yielding 9.7% per year. Treasury bonds with the same maturity are yielding 6% per year, and the real risk-free rate (r*) is 2.6%. The average inflation premium is 3%, and the maturity risk premium is estimated to be 0.1(t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.6%, what is the default risk premium on the corporate bonds?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91727121

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