A Treasury bond that matures in 10 years has a yield of 6%. A 10 year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?© BrainMass Inc. brainmass.com June 3, 2020, 8:50 pm ad1c9bdddf
The market rate of interest is equal to the risk-free rate of interest plus the risk premium. Treasury bonds are by ...
This solution discusses determining default risk of a treasury bond in 78 words.