Question: Currently, the interest rate for a 10 -year bond issued by Ford is 7.62%, and the interest rate for a 10-year bond issued by General

Currently, the interest rate for a 10 -year bond issued by Ford is 7.62%, and the interest rate for a 10-year bond issued by General Motors is 6.84%. The liquidity risk premium for Ford is 0.57%, whereas the liquidity risk premium for General Motors is 0.42%.

What is the difference in the default risk premium between Ford and General Motors?

Step by Step Solution

★★★★★

3.47 Rating (150 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To calculate the difference in the default risk premium between Ford and General Motors we ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Part 1 : Design algorithms using IPO charts and flowcharts OR pseudocode; these designs will go into a Microsoft Word document. Part 2 : Start coding your program by creating a skeleton of the...

The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...

Steven Price invests in high quality bonds. He currently holds several of such bonds, all of which have a par value of $1000 and pay a fixed rate of interest twice a year. A 10 year bond issued by...

The trial balance of Pacilio Security Services Inc. as of January 1, 2021, had the following normal balances: Cash ..................... $113,718 Petty cash ................... 100 Accounts...

Currently, the interest rate for a 10 -year bond issued by Ford is 8.07%, and the interest rate for a 10 -year bond issued by General Motors is 6.13%. The liquidity risk premium for Ford is 0.47%,...

please show work. Currently, the interest rate for a 10 -year bond issued by Ford is 7.91%, and the interest rate for a 10 -year bond issued by General Motors is 6.32%. The liquidity risk premium for...

In the Liquidity Premium Theory Model, bonds and their corresponding interest rates have two properties: Term to maturity Date issued Lets use the following notion i _ date ^ term The superscript...

The effective interest rate of a 10-year,8percent, $1,00 bond issued at 103 would be approximately a. 7.8 percent b. 8.2 percent. c. 8.0 percent. d. 7.6 percent 18. On January 1, Harrison issued...

2. Tax rate = 30%. A 10%, 10-year bond (issued by GM) pays interest annually. If the bond was issued 4 years ago and is currently quoted at 90, calculate the cost of debt and actual cost of debt....

20. The effective interest rate of a 10 year, 8%, $ 1,000 bond issued at 103 would be approximately a) 8% b) 8.2% c) 7.8% d) 7.6% 21. On January 1, 2017, Yearly Corporation issued $ 500,000 of 10%,...

Write a brief note on Best practices for object oriented database modeling

The nine measurements that follow are furnace temperatures recorded on successive batches in a semiconductor manufacturing process (units are ): 953, 950, 948, 955, 951, 949, 957, 954, 955. (a)...

The marketing manager for Green N Clean, a strong national detergent brand, believes he knows how customers will react to a new product offering, but conducts market research to provide justification...

Calculating Annuities due you want to buy a new sports car from Muscle Motors for $61,000. The contract is in the form of a 60-month annuity due at an 8.15 percent APR. What will your monthly payment...

Calculating EAR Find the EAR in each of the following cases: Stated Rate (APR) Number of Times Compounded Effective Rate (EAR) Quarterly Monthly 18 10 Daily 14 Infinite

Chin-Ups while doing a chin-up, a man lifts his body 0.40 m. (a) How much work must the man do per kilogram of body mass? (b) The muscles involved in doing a chin-up can generate about 70 I of work...

A cylinder contains 0.100 mol of an ideal monatomic gas. Initially the gas is at a pressure of 1.00 X 105 Pa and occupies a volume of 2.50 X 10-3 m3. (a) Find the initial temperature of the gas in...

Calculating Interest Rates Assume the total cost of a college education will be $280,000 when your child enters college in 18y. You presently have $50,000 to invest. What annual rate of interest must...

Unlike other markets, imbalances in the electricity market have extreme consequences so the market cannot be left on its own and it needs to be managed/regulated.TrueFalse

Assume that the average firm in your companys industry is expected to grow at a constant rate of 6 percent, and its dividend yield is 7 percent. Your company is considered as risky as the average...

At year-end 2015, total assets for Shome, Inc., amounted to $1.2 million and accounts payable were $375,000. Sales, which totaled $2.5 million in 2015, are expected to increase by 25 percent in 2016....

What is the expected return of the following investment? Probability Payoff 0.3 30.0% 0.2 10.0 0.5 -2.0

In a local community there are three grocery chain stores. The three have been carrying out a spirited advertising campaign in which each claims to have the lowest prices. A local news station...

A psychologist is conducting a study to determine whether there are differences between the ability of history majors and mathematics majors to solve various types of puzzles. Five mathematics majors...

Consider the following data for a two-factor experiment: Factor A Level 1 Level 2 Level 3 33 30 21 Level 1 31 42 30 35 36 30 Factor B 23 30 21 Level 2 32 27 33 27 25 18 a. Based on the sample data,...