A government bond that matures in 15 years has a yield of 7.8%. A 15-year corporate bond has a yield of 11.3%. Assume that the liquidity premium on a corporate bond is 1.7%. What is the default risk premium on the corporate bond?

Question 10Answer

a.

11.30%

b.

1.30%

c.

10.50%

d.

7.80%