Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 05, 2024

A Treasury bond that matures in 20 years has a yield of 8%. A 20-year corporate bond has a yield of 11%. Assume that the

A Treasury bond that matures in 20 years has a yield of 8%. A 20-year corporate bond has a yield of 11%. Assume that the liquidity premium on the corporate bond is 1.0%. What is the default risk premium on the corporate bond?

A.- 1.75%

B.- 0.50%

C.- 2.00%

D.- 1.50%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Applications and Theory

Authors: Marcia Cornett, Troy Adair

3rd edition

1259252221, 007786168X, 9781259252228, 978-0077861681

More Books

Students also viewed these Finance questions

Question

★★★★★

Use the information in P 23-6 to prepare a charge-discharge statement for the estate of Tom Josephson for the period May 16, 2013 through June 30, 2013. In Problem 6 Tom Josephson, Testator Inventory...

Answered: 1 week ago

Question

★★★★★

You purchased a rental property for $ 172,500 at the beginning of last year. The net rental income for the year was $ 12,615 . The value of the property increased to $ 183,000 by the end of that...

Answered: 1 week ago

Question

★★★★★

How has the issue of exiting from deals in emerging markets been addressed? What else do you think should be done?

Answered: 1 week ago

Question

★★★★★

Milwaukee Manufacturing Company presents the following partial list of account balances, after adjustments, as of December 31, 2016: The following information is also available but is not reflected...

Answered: 1 week ago

Question

★★★★★

A Treasury bond that matures in 20 years has a yield of 8%. A 20-year corporate bond has a yield of 11%. Assume that the liquidity premium on the corporate bond is 1.0%. What is the default risk...

Answered: 1 week ago

Question

★★★★★

Jem bought a home computer for $1,299. He plans to pay $300 per month till the purchase is paid off. Assume there is a 1.5% interest charge on the unpaid balance and the U.S. Rule is used. What is...

Answered: 1 week ago

Question

★★★★★

Jail and Sail: Alcatraz Tour and Cruise Contribution Income Statement Sales For the Month of July Less variable costs: Admission fees Overhead Hors d'oeuvres Selling and administrative Contribution...

Answered: 1 week ago

Question

★★★★★

Troy and Kristy Reynolds (both currently age 56) have determined that they will require retirement income equal to $93,000 in today's dollars, based on their current income. They plan to retire in...

Answered: 1 week ago

Question

★★★★★

3. The Roz trust received taxable income of $20,000 and $10,000 of tax-exempt interest. The trustee paid fiduciary fees of $6,000 and a charitable contribution, as authorized by the trust agreement,...

Answered: 1 week ago

Question

★★★★★

5) If liabilities increase $120,000 during a given period and shareholders' equity decreases $25,000 during the same period, assets must: A) decrease $145,000 B) increase $145,000 C) increase $95,000...

Answered: 1 week ago

Question

★★★★★

Two important profitability measures that investors use in assessing efficiency and effectiveness of a merchandiser's operations are earnings after retail numbers (EARN) and net income dividends and...

Answered: 1 week ago

Previous Question Next Question