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Want to learn how to calculate default risk premium
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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...
Default risk premium
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What is the equation for calculating the default risk premium?
Default risk premium
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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?
Default risk premium (DRP)
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Type of Security 5-Year Treasury Note 5% 5-Year Corporate Bond (High quality) 6% 5-Year Corporate Bond (Low quality) 8% Calculate the default risk premium (DRP) on the Corporate bonds. View more questions Search
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