Based on this information and the knowledge that the, Financial Management

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Based on this information and the knowledge that the

Assume you make the following investments:

- A $10,000 investment in a 10 year T-bond that yields 7.00%, and

- A $20,000 investment in a 10 year corporate bond with an A rating and a yield of 8.70%

Based on this information, and the knowledge that the difference in liquidity risk premiums between the two bonds is 0.50%, what is your estimate of the corporate bond's default risk premium?

a. 1.70%

b. 1.20%

c. 2.04%

d. 1.68%

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