Calculate the default risk premium on ten year bonds

Assignment Help Financial Management

Reference no: EM131298323

NikkiG’s Corporation’s 10-year bonds are currently yielding a return of 6.45 percent. The expected inflation premium is 1.15 percent annually and the real risk-free rate is expected to be 2.90 percent annually over the next ten years. The liquidity risk premium on NikkiG’s bonds is 0.30 percent. The maturity risk premium is 0.30 percent on 2-year securities and increases by 0.05 percent for each additional year to maturity. Calculate the default risk premium on NikkiG’s 10-year bonds. (Round your answer to 2 decimal places.)

Reference no: EM131298323

Questions Cloud

Evaluate financial opportunity presented by the companies : Perform at least one profitability ratio to measure the income and operating success of your selected company - Perform at least one liquidity ratio to measure the ability of the company to pay short-term debt and meet unexpected needs.

What should current rate be on two year treasury securities : One-year Treasury bills currently earn 1.45 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 1.65 percent. If the unbiased expectations theory is correct, what should the current rate be on 2-year Treasury secur..

Difference between debt financing and equity financing : List the common types of creditors that can provide debt financing to firms?- Briefly describe the common methods of equity financing for a firm?

Identify and explain other methods of obtaining funds : Identify and explain other methods of obtaining funds that a firm can use in addition to debt financing and equity financing?

Calculate the default risk premium on ten year bonds : NikkiG’s Corporation’s 10-year bonds are currently yielding a return of 6.45 percent. The expected inflation premium is 1.15 percent annually and the real risk-free rate is expected to be 2.90 percent annually over the next ten years. The liquidity r..

Extensive records about employees : Some managers and organizations go to great lengths to monitor their employees' behavior, and they keep extensive records about employees' behavior and performance.

Nonconstant growth stock valuation : Assume that the average firm in your company's industry is expected to grow at a constant rate of 7% and that its dividend yield is 5%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..

What services do investment banks provide : What services do investment banks provide to clients that are doing an IPO?- Why might the amount of funds a firm needs to raise affect its willingness to do an IPO?

User Account

All Pages