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    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.