The ten year bonds of gator corporation are yielding 8 per, Ask an Expert

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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?

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