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6-11. Default Risk Premium A company’s 5-year bonds are yielding 7.75% per year. Treasury bonds with...

6-11. Default Risk Premium A company’s 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real-risk free rate (r*) is 2.3%. The average inflation premium is 2.5%; and the maturity risk premium is estimated to be 0.1 x (t-1) %, where t = number of years to maturity? If the liquidity premium is 1%, what is the default risk premium on the corporate bonds?

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