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Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 7.10%. Also, corporate bonds have a 0.25% liquidity premium versus a zero
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 7.10%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds?
| a. | 1.64% |
| b. | 1.55% |
| c. | 1.19% |
| d. | 1.35% |
| e. | 1.38% |
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