Question a companys 5-year bonds are yielding 74 per year, Ask an Expert

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Question: A company's 5-year bonds are yielding 7.4% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is 2.5%. The average inflation premium is 2.3%, 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 1.5%, what is the default risk premium on the corporate bonds? %

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Accounting Basics, Accounting

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