At present, 20-year Treasury bonds are yielding 5.1%, while some 20-year corporate bonds that you are interested in are yielding 9.1%. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is 0.25% while it is 0.0% on the Treasury bonds, what is the default-risk premium on the corporate bonds?
Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section.
DATA
20-year Treasury bond yield	5.10%
20-year corporate bond yield	9.10%
Liquidity-risk premium on corporate bond	0.25%
SOLUTION
Total risk premium on corporate bond
Default-risk premium on corporate bond