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Lets assume a T-bond that matures in 10 years has a yield of 5%. A 10-yr corporate bond has a yield of 7%. Assume that the liquidity premium (LP) on the corporate bond is 0.4%. How does one calculate the default rsik premium (DRP)?

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Lets assume a T-bond that matures in 10 years has a yield of 5%. A 10-yr corporate bond has a yield of 7%. Assume that the liquidity premium (LP) on the corporate bond is 0.4%. How does one calculate the default rsik premium (DRP)?

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Default Risk: Uncertainty that the realized return will deviate from the expected return because the issuer will fail ...

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