Default risk premium and liquidity risk premium

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The Wall Street Journal reports that the current rate on 9-year Treasury bonds is 6.60 percent, the rate on 16-year Treasury bonds is 7.00 percent, and the rate on a 16-year corporate bond issued by MHM Corp. is 8.85 percent. Assume that the maturity risk premium is zero. If the default risk premium and liquidity risk premium on an 9-year corporate bond issued by MHM Corp. are the same as those on the 16-year corporate bond, calculate the current rate on MHM Corp.’s 9-year corporate bond. (Round your answer to 2 decimal places.)

Reference no: EM131909343

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