Question
Use the following information to answer. Coupon Payments are annual unless otherwise indicated! Years Face Coupon Market Security Rating Maturity Value Rate Price Treasury 1
Use the following information to answer. Coupon Payments are annual unless otherwise indicated!
| Years | Face | Coupon | Market | ||
| Security | Rating | Maturity | Value | Rate | Price |
| Treasury | 1 | $ 1,000 | 0.00% | $ 965.00 | |
| Treasury | 3 | $ 1,000 | 1.90% | $ 939.06 | |
| Treasury | 5 | $ 1,000 | 4.30% | $ 932.42 | |
| Treasury | 10 | $ 1,000 | 6.80% | $ 1,007.12 | |
| Treasury | 15 | $ 1,000 | 6.60% | $ 908.25 | |
| Corp A | A | 5 | $ 1,000 | 8.10% | $ 990.00 |
| Corp B | BB | 10 | $ 1,000 | 7.90% | $ 859.88 |
| Corp C | AA | 15 | $ 1,000 | 7.00% | $ 660.00 |
What is the default risk premium for a BB debt security (round to two places)
Multiple Choice
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4.08%
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3.50%
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3.35%
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none of the above
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2.30%
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
