What is the default risk premium on the corporate bonds

Reference no: EM133365596

Question: A company's 5-year bonds are yielding 6% per year. Treasury bonds with the same maturity are yielding 4.3% per year, and the real risk-free rate (r*) is 2.55%. The average inflation premium is 1.35%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.5%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.

Reference no: EM133365596

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