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    lindabelle's Avatar
    lindabelle Posts: 1, Reputation: 1
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    #1

    Dec 3, 2008, 09:58 PM
    Want to learn how to calculate default risk premium
    If I am correct I need to use yield spread between a TB which is 6% and a Corporate bond which is 8%. I believe the yield rate is 1.33 (8 /6) I know the correct answer is 1.50?? Does the liquity premium of .05 come into play?? I am 54 years old and have 2 classes to complete masters, I am trying not to freak. I hope someone can help me.
    Thank You very much

    Linda
    ang36985's Avatar
    ang36985 Posts: 1, Reputation: 1
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    #2

    Apr 13, 2010, 08:52 AM
    I am not on this website but I think yes, the 0.5% lp comes into play. 8%-6%=2-0.5=1.50%. I hope this helps.
    Gerranamo's Avatar
    Gerranamo Posts: 3, Reputation: 1
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    #3

    Aug 2, 2010, 04:57 PM
    If 10-year T-bonds have a yield of 5.2%, 10 year corporate bonds yield 7.5%, the maturity risk premium on all 10-year bonds is 1.1%, and corporate bonds have a 0.2% liquity premium versus a zero liquity premium for T-bonds, what is the default risk premium on the corporate bond?

    Would the answer be 1.00%?
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