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DEFAULT RISK PREMIUM The real risk-free rate, r, is 1.6%. Inflation is expected to average 2% a year for the next 4 years, after
DEFAULT RISK PREMIUM The real risk-free rate, r", is 1.6%. Inflation is expected to average 2% a year for the next 4 years, after which time inflation is expected to average 5.2% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 11.3%, which includes a liquidity premium of 0.85%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
