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Default Risk Premium A company's 5-year bonds are yielding 6% per year. Treasury bonds with the same maturity are yielding 4.7% per year, and the
Default Risk Premium
A company's 5-year bonds are yielding 6% per year. Treasury bonds with the same maturity are yielding 4.7% per year, and the real risk-free rate (r*) is 2.85%. The average inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1 (t - 1)%, where t = number of years to maturity. If the liquidity premium 0.6%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
A company's 5 -year bonds are yielding 6% per year. Treasury bonds with the same matunty are vieiding 4.7% per year, and the real risk-free rate ( r ) is 2.85%. The average inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1(t1)%, where t= number of years to maturity. If the liquidity premium is 0.6%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places Step by Step Solution
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