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4 Jun 2020
Suppose 10-years T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.65%. Also, corporate bonds have a 0.25% liquidity premium vs. 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?
A. 0.86%
B. 1.34%
C. 1.20%
D. 1.22%
E. 1.10%
Suppose 10-years T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.65%. Also, corporate bonds have a 0.25% liquidity premium vs. 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?
A. 0.86%
B. 1.34%
C. 1.20%
D. 1.22%
E. 1.10%
2 Jun 2021