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The following table gives hypothetical yields on various debt instruments: Instrument Yield 5-year US Treasury Bond 1.50% 5-year Corporate Investment-Grade Bond 1.85% 5-year Corporate High-Yield

  1. The following table gives hypothetical yields on various debt instruments:
Instrument Yield
5-year US Treasury Bond 1.50%
5-year Corporate Investment-Grade Bond 1.85%
5-year Corporate High-Yield Bond 3.45%
10-year US Treasury Bond 1.75%
10-year Corporate High-Yield Bond 5.60%

Calculate the risk premium for:

  1. a 5-year corporate investment-grade bond
  2. a 5-year corporate high-yield bond
  3. a 10-year corporate high-yield bond

Please provide examples

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