What is its default risk premium

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Reference no: EM132069968

The real risk free rate is 1.7%. Inflation is expected to average 1.5% a year for the next 4 years after which time inflation is expected to average 4.8% a year.

Assume that there is no maturity risk premium.

An 8 year corporate bond has a yield of 8.7%, which includes a liquidity premium of 0.75%. What is its default risk premium?

Reference no: EM132069968

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