10 yr T-bond w/yield of 6.2%; 10 yr Corp bond yields 8.5%. The maturity risk premium on all 10 yr bonds is 1.3%, and corp bonds have a 0.4% liquidity premium vs. zero liquidity premium for T-bonds. What is the default risk premium on the corp bond?
Not sure how to factor in the liquidity premium or maturity risk premium. Without those factors, you would take the difference between the Treasury bond 6.2% and Corp bond 8.5% for the DRP. Please help!
