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

You are analyzing the difference in yield between a Government of Canada bond and a corporate bond issued by Loblaws. The 10-year government bond has a yield of 6.0% and a 10-year Loblaws bond has a yield of 9.0%. The maturity risk premium for any type of 10-year bonds in the market is 1.8%. The liquidity premium on the Loblaws bond is 1.0% while the liquidity premium on the Government of Canada bond is 0.3%. What must be the default risk premium on the Loblaws bond?

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