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    Good1970's Avatar
    Good1970 Posts: 1, Reputation: 1
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    #1

    Jan 27, 2008, 09:25 AM
    Default Risk Premium
    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?
    MaggieMouse's Avatar
    MaggieMouse Posts: 226, Reputation: 8
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    #2

    Feb 5, 2008, 09:10 PM
    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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