A companys 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding

Question:

A company’s 5-year bonds are yielding 7.75% per year. Treasury bonds with the same 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 risk premium is estimated to be 0.1 $ (t = 1)%, where t " number of years to If the liquidity premium is 1%, what is the default risk premium on the corporate bonds?

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...