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Assume the 10-year Treasury bond has a yield of 3% (hint - this is the risk-free rate) and a 10-year corporate bond is yielding 7%
Assume the 10-year Treasury bond has a yield of 3% (hint - this is the risk-free rate) and a 10-year corporate bond is yielding 7% (hint - this is the nominal rate). If the liquidity risk premium on the corporate bond is 0.5%, what is the corporate bond's default-risk premium? Remember, since we are talking about the same timeframe, there will be no inflation premium or maturity premium. (Use decimals when inserting an answer - for instance, if your answer is 10.5% enter 0.105.)
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