The interest rate on a 21-year Treasury Bond is 8.25%. A comparable maturity, Aaa-rated corporate bond yielding

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The interest rate on a 21-year Treasury Bond is 8.25%. A comparable maturity, Aaa-rated corporate bond yielding is 11%. Another comparable maturity, but lower quality corporate bond has a yield at 14%, which includes liquidity premium of 1.6%.

a. determine the default risk premium on the Aaa-rated bond.

b. determine the default risk premium on the lower quality corporate bond.

Related Book For answer-question

Introduction to Finance Markets Investments and Financial Management

ISBN: 978-1118492673

15th edition

Authors: Melicher Ronald, Norton Edgar

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Posted Date: Mar 22, 2024 12:42 AM

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The interest rate on a 21-year Treasury Bond is 8.25%. A comparable maturity, Aaa-rated corporate bond yielding

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Introduction to Finance Markets Investments and Financial Management

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