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Default risk premium on the corporate bonds

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A company's 5-year bonds are yielding 7.5% per year. Treasury bonds with the same maturity are yielding 5.2% per year and the real risk-free rate is 2.3%. The average inflation premium is 2.5%; and the maturity risk premium is estimated to be 0.2% x (t-1). If the liquidity premium is 1%, what is the default risk premium on the corporate bonds?

Reference no: EM133060471

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