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If 10-year T-bonds have a yield of 5%, 10-year corporate bonds yield 7%, the maturity risk premium on all 10-year bonds is 1%, 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? (hint: think about what cause the difference in the yields of the 10-year T-bonds and the 10-Year corporate bonds)

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Financial Management, Finance

Category:- Financial Management
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