Question: At present, 20-year Treasury bonds are yielding 4.9 %4.9% while some 20-year corporate bonds that you are interested in are yielding 8.7 %8.7%. Assuming that

At present, 20-year Treasury bonds are yielding

4.9 %4.9%

while some 20-year corporate bonds that you are interested in are yielding

8.7 %8.7%.

Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is

0.28 %0.28%

while it is

0.0 %0.0%

on the Treasurybonds, what is the default-risk premium on the corporate bonds? Note that a Treasuty security should have no default-risk premium.

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