Say a t-bond that matures in 10 years has a yield of 6 percent. A 10 year corp bond has a yield of 8 percent. Assume that the liquidity premium on the corp bond is 0.5 percent. What is the default risk premium on the corp bond?
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Say a t-bond that matures in 10 years has a yield of 6 percent. A 10 year corp bond has a yield of 8 percent. Assume that the liquidity premium on the corp bond is 0.5 percent. What is the default risk premium on the corp bond?
I don't understand clearly
The thread is old so it doesn't matter. It's also homework, and it would make perfect sense to someone who understands that class. (Though it might not make much sense to a lot of investors.)
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