What is default risk premium

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Reference no: EM131449292

YOP Inc has a 3 year outstanding bond with 13%yield. Investors expect to earn an average of 3% in real rate of return. Inflation is expected to be 1.5%, 2.0% and 4% for the next 3 years. Its lack of popularity in the finanical market requires it to pay 2.5% for its lack of liquidty, and its relatively shortamount of timebefore maturity only requires a 1.5% maturity risk premium. What is YO's default risk premium?

Reference no: EM131449292

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