Solve: Default Risk Premium on a Corporate Bond
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Question: A treasury bond that matures in ten years has a yield of 6 percent. A 10 year corporate bond has a yield of 8 percent. Assume that the liquidity premium on the corporate bond is .5 percent. What is the default risk premium on the corporate bond?
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Solution Summary
In about 20 words, this solution briefly, but concisely describes how to calculate the risk premium on a corporate bond. The required equation, along with the accompanying calculations are all provided.
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