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5. 6. 7-3: The Determinants of Market Interest Rates Default Risk Premium A Treasury bond that matures in 10 years has a yield of 5%.

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5. 6. 7-3: The Determinants of Market Interest Rates Default Risk Premium A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 8.5%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. 7 8. % 9

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