Suppose the yield on a 30-year corporate bond rated Aaa is 8.86 percent and the yield on a 30-year Treasury bond is 8.27 percent. What is the default risk premium?
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Suppose the yield on a 30-year corporate bond rated Aaa is 8.86 percent and the yield on a 30-year Treasury bond is 8.27 percent. What is the default risk premium?
If treasury bond pays 8.27, then it takes another .59 on interest to reward for bearing the extra risk on corporate bond. The premium is .86-8.27->.59
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