Ask Question, Ask an Expert


Ask Basic Finance Expert

problem: The ten year bonds of Gator Corporation are yielding 8% per year. Treasury bonds with the same maturity are yielding 6.4% per year. The real risk-free rate (k*) has not changed in recent years and is 3%. The average inflation premium is 2.5% and the maturity risk premium takes the form: MRP = 0.l%(t - l) where t = number of years to maturity. If the liquidity premium is 0.5%, find out the default risk premium on the corporate bond?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919559

Have any Question? 

Related Questions in Basic Finance

Suppose you borrow us30000000 at 7 for 30 years with 0

Suppose you borrow US$300,000.00 at 7% for 30 years with 0 points. Suppose also that the mortgage note includes a prepayment penalty of 1% of the mortgage balance if the mortgage is prepaid within 10 years. What is the e ...

A investor was considering purchasing treasury bonds

An investor was considering purchasing Treasury bonds. Five-year bonds had a 3% yield and 2-year bonds had 2% yield. The investor chose the 5-year bond at a par price for a 3% yield. Subsequently, even though market inte ...

Assignment lasa 1-the time value of moneymary has been

Assignment: LASA 1-The Time Value of Money Mary has been working for a university for almost 25 years and is now approaching retirement. She wants to address several financial issues before her retirement and has asked y ...

The current price of gold is 1600 per troy ounce there are

The current price of gold is $1,600 per troy ounce. There are no storage costs. The risk free rate of interest is 5% continuously compounded. Please help me with the answers for all the questions. (a) What is the forward ...

Assignment - tvm- tth classbullsubmit using assignment tab

Assignment - TVM- T/Th class • Submit using Assignment tab in eLearning by uploading your completed excel file. • Open a new (fresh) excel workbook to perform you calculations. • You are allowed only one submission, so p ...

Select a publicly-traded united states corporation and

Select a publicly-traded United States corporation and analyze its funds acquisition techniques. Your paper must be between 8 and 10 double-spaced pages and include the following discussions: 1. Brief history or backgrou ...

Why is knowledge of finance important in running of

Why is knowledge of finance important in running of organizations?

Response of firms to a stimulative monetary policyin a weak

Response of Firms to a Stimulative Monetary Policy : In a weak economy, the Fed commonly implements a stimulative monetary policy to lower interest rates, and presumes that firms will be more willing to borrow. Even if b ...

A bonds market price is 875 it has a 1000 par value will

A bond's market price is $875. It has a $1,000 par value, will mature in 6 years, and has a coupon interest rate of 8 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to mat ...

What are the advantages of fixed exchange rateswhat are the

What are the advantages of fixed exchange rates? What are the disadvantages? Does it matter if the country is large or small?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate