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A company's 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year,
Posted: Fri Jul 01, 2022 7:40 am
by answerhappygod
- A Company S 5 Year Bonds Are Yielding 7 75 Per Year Treasury Bonds With The Same Maturity Are Yielding 5 2 Per Year 1 (38.92 KiB) Viewed 31 times
A
company's 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, the real risk-free rate (r) is 2.3%. The average inflation premium is 2.5%, and the maturity risk premium is estimated to be 0.1 x (t- 1) %, where t = number of years to maturity. If the liquidity premium is 1%, what is the default risk premium on the corporate bonds? 1.55%. 2.55%. 2.00%. 1.00%.