Question: You are analyzing the difference in yield between a government bond and a corporate bond issued by Nike. The 10-year government bond has a yield

You are analyzing the difference in yield between a government bond

You are analyzing the difference in yield between a government bond and a corporate bond issued by Nike. The 10-year government bond has a yield of 6.0% and a 10-year Nike bond has a yield of 9.0%. The maturity risk premium for any type of 10-year bonds in the market is 1.3%. The liquidity premium on the Nike bond is 0.5% while the liquidity premium on the government bond is 0%. What must be the default risk premium on the Nike bond? a) 3.0 % b) 2.0% c) 1.7% d) 2.5 %

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