Intro

$10-$year Treasury$-$bonds yield $4\mathrm{.}2\%$ and $10-$year corporate bonds yield $7\mathrm{.}15\%.$ The

maturity risk premium on both $10-$year Treasury and corporate bonds is $1\mathrm{.}3\%.$ Corporate

bonds have a $0\mathrm{.}65\%$ liquidity premium, while $T-$bonds have a zero liquidity premium.

Part $1$

$$ Attempt $\frac{1}{3}$ for $10$ pts$.$

What is the default risk premium on corporate bonds?