Default risk premium on the corporation 10-year bonds

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A corporation's 10-year bonds are currently yielding a return of 12.25 percent. The expected inflation premium is 2.75 percent annually and the real interest rate is expected to be 3.00 percent annually over the next 10 years. The liquidity risk premium on the corporation's bonds is 0.25 percent. The maturity risk premium is 0.25 percent on two-year securities and increases by 0.25 percent for each additional year to maturity. What is the default risk premium on the corporation's 10-year bonds?

Reference no: EM132660466

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