Question: Attempts 0 Keep the Highest 0 / 1 5. Problem 6.11 (Default Risk Premium) eBook A company's 5-year bonds are yielding 9% per year. Treasury

Attempts 0 Keep the Highest 0 / 1 5. Problem 6.11

Attempts 0 Keep the Highest 0 / 1 5. Problem 6.11 (Default Risk Premium) eBook A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is 2.85%. The average inflation premium is 1.95%, and the maturity risk premium is estimated to be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.5%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places. %

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