Question
Default Risk Premium The real risk-free rate, r*, is 3.4%. Inflation is expected to average 2.8% a year for the next 4 years, after which
Default Risk Premium
The real risk-free rate, r*, is 3.4%. Inflation is expected to average 2.8% a year for the next 4 years, after which time inflation is expected to average 2.95% a year. Assume that there is no maturity risk premium. An 11-year corporate bond has a yield of 8.85%, which includes a liquidity premium of 0.65%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places.
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The Commercial Aircraft Finance Handbook
Authors: Ronald Scheinberg
2nd Edition
1138558990, 978-1138558991
