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?© BrainMass Inc. brainmass.com June 3, 2020, 9:37 pm ad1c9bdddf
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.