A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate...

A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 7.00%. Assume that the liquidity premium on the corporate bond is 0.35%.

What is the default risk premium on the corporate bond? Round your answer to two decimal places.

Expert Solution

Default risk premium = Corporate bond yield - Treasury bond yield - Liquidity premium

Default risk premium = 7.00% - 4.75% - 0.35%

Default risk premium = 1.90%

jeff jeffy answered 2 years ago

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