unm
Sep 5, 2007, 10:18 AM
A U.S. Treasury bond that matures in 10 years has a yield of 6%. A 10-yr corporate bond has a yield of 8%. Assume the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond? (Hint: since both bonds have the same maturity, they will have the same MRP)