Question: At present 20 year Treasury bonds are yielding 5 1 while
At present, 20- year Treasury bonds are yielding 5.1% while some 20- year corporate bonds that you are interested in are yielding 9.1%. Assuming that the maturity- risk premium on both bonds is the same and that the liquidity- risk premium on the corporate bonds is 0.25% while it is 0.0% on the Treasury bonds, what is the default- risk premium on the corporate bonds?
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