6. If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 5.8%, the maturity risk premium on all 10-year bonds is 3.1%, 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? *

a) 1.90%

b) 2.09%

c) 2.30%

d) 2.53%

e) None of the above

13. The Canadian government issues a Treasury bond that matures in 15 years has a yield of 7%. A French firm issues a 15-year corporate bond has a yield of 9.5%. Assume that the liquidity premium on the corporate bond is 2.5%. What is the default risk premium on the corporate bond? *

a) 2%

b) 1.5%

c) 2.5%

d) 3%

e) None of the above

15. Zoom Inc's 6-year bonds yield 6.50% and 6-year T-bonds yield 5.25%. The real risk-free rate is r* = 0.5%, the default risk premium for Zoom's bonds is DRP = 0.40%, the liquidity premium on Zoom's bonds is LP = 2.2% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 6-year bonds? *

a) 0.73%

b) 0.81%

c) 0.90%

d) 1.25%

e) None of the above

17. Your father gets a good job and wants to deposit in his account $1200 at the end of each year for 3 years. He earns 2% interest paid daily. How much will be in his account after 3 years? *

a) $3,900.90

b) $3,672.48

c) $4,200.36

d) $4,500.05

e) None of the above

19. Khonaysser Motors issues 10-year bond. Suppose you have the following info: Real risk-free rate = 3%, Inflation rate = 8%/year for each of next five years, 6% thereafter, MRP = 0.1*(t 1) % where t is the securitys maturity, LP = 0.55% and DRP=0.8%What is the yield on this bond? *

a) 9.75%

b) 9.25%

c) 9.00%

d) 8.5%

e) None of the above