Question
A treasury bond maturing in 5 years has a yield of 4 percent. A 5-year corporate bond has a yield of 7 percent. Consider that
A treasury bond maturing in 5 years has a yield of 4 percent. A 5-year corporate bond has a yield of 7 percent. Consider that the liquidity premium on the corporate bond is 0.5 percent. What is the default risk on the corporate bond?
The formula I used is r+ip+mrp+0.5%. I got 17.5% but not sure if this is correct.
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Management and Cost Accounting
Authors: Colin Drury
10th edition
1473748873, 9781473748910 , 1473748917, 978-1473748873
