Problemsuppose 10-year t-bonds have a yield of 530 and, Ask an Expert

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Problem:

Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.90%. 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%.

Required:

What is the default risk premium on corporate bonds?

3.12%
2.95%
3.35%
3.08%
4.12%

Note: Please provide reasons to support your answer.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91149579

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