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

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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%. What is the default risk premium on corporate bonds?

Answer

4.12%
3.35%
3.12%
3.08%
2.95%

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