Default risk premium the real risk-free rate r is 225, Ask an Expert

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Default Risk Premium The real risk-free rate, r*, is 2.25%. Inflation is expected to average 2.5% a year for the next 4 years, after which time inflation is expected to average 3.4% a year. Assume that there is no maturity risk premium. An 11-year corporate bond has a yield of 9.8%, which includes a liquidity premium of 0.45%. What is its default risk premium? Round your answer to two decimal places. %

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Financial Management, Finance

Category:- Financial Management
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