Question

If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 10.1%, the maturity risk...

If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 10.1%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Group of answer choices 2.73% 3.05% 3.22% 3.50% 2.84%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Liquidity risk premium (LP)     0.40%             

Corporate bond yield (CY)      10.10%                       

Treasury bond yield (TY)        6.20%             

Deafult risk premium (CY-TY) - LP  

Deafult risk premium (10.10%-6.20%)-0.40%

Deafult risk premium (3.90%-0.40%)           

Deafult risk premium 3.50%             

Thus, default risk premium on corporate bond is 3.50%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
10-year Treasury-bonds yield 4.2% and 10-year corporate bonds yield 7.15%. The maturity risk premium on both...
10-year Treasury-bonds yield 4.2% and 10-year corporate bonds yield 7.15%. The maturity risk premium on both 10-year Treasury and corporate bonds is 1.3%. Corporate bonds have a 0.65% liquidity premium, while T-bonds have a zero liquidity premium. What is the default risk premium on corporate bonds?
Suppose 10-year T-bonds have a yield of 4.90% and 10-year corporate bonds yield 6.67%. Also, corporate...
Suppose 10-year T-bonds have a yield of 4.90% and 10-year corporate bonds yield 6.67%. Also, corporate bonds have a 0.32% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.05%. Additionally, the real risk free rate is 0.15%. What is the default risk premium on corporate bonds? Group of answer choices 1.45% 1.30% 0.40% 0.95%
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also, corporate...
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds?
Question 7 If 30-year T-bonds have a yield of 7.2%, 30-year corporate bonds yield 9.9%, the...
Question 7 If 30-year T-bonds have a yield of 7.2%, 30-year corporate bonds yield 9.9%, the maturity risk premium on all 30-year bonds is 1.6%, and corporate bonds have a 0.6% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?
Suppose 10-year U.S. Treasury bonds (T-bonds) have a yield of 5.30% and 10-year corporate bonds yield...
Suppose 10-year U.S. Treasury bonds (T-bonds) have a yield of 5.30% and 10-year corporate bonds yield 6.65%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for Treasury bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds? I don’t have a financial calculator. Please show how to solve without a financial calculator.
5. Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also,...
5. Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds? A. 1.08% B. 1.20% C. 1.32% D. 1.45% E. None of the above. 6. A company has two $1,000 face value bonds outstanding bond selling for $701.22....
1. If 9-year T-bonds have a yield of 2.9%, 9-year A-rated corporate bonds yield 4.8%, the...
1. If 9-year T-bonds have a yield of 2.9%, 9-year A-rated corporate bonds yield 4.8%, the maturity risk premium on all 9-year bonds is 1.2%, and A-rated corporate bonds have a 0.6% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? 2. You project that you will need $50,000 in 9 years to put a down payment on a home on a conventional mortgage program. You plan to save for...
The Gran Group's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate...
The Gran Group's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.80%, the default risk premium for Gran's bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Gran's bonds is LP = 1.25%, and the maturity risk premium for all bonds is found with the formula MRP = (t ? 1) × 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on...
Chandler Co.'s 5-year bonds yield 11.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is...
Chandler Co.'s 5-year bonds yield 11.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Chandler's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t − 1) × 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Chandler's...
Chandler Co.'s 5-year bonds yield 6.75%, and 5-year T-bonds yield 5.15%. The real risk-free rate is...
Chandler Co.'s 5-year bonds yield 6.75%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Chandler's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t − 1) × 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Chandler's...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT