Calculating default risk premium on corporate bond, Finance Basics

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Calculating default risk premium on corporate bond

The real risk-free rate, k*, is 2.5%. Inflation is expected to average 2.8 perecent a year for the next 4 years, after which time inflation is expected to average 3.75% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 8.3%. Assume that the liquidity premium on the corporate bond is 0.75%. What is the default risk premium on the corporate bond?

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Finance Basics: Calculating default risk premium on corporate bond

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Finance Basics: Calculating default risk premium on corporate bond

Reference No:- TGS053113

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Recent Questions Asked Finance Basics

Q : Prepare a master budget for each month

Q : Incremental cash flows and npv

Q : Problem based on shares of treasury stock

Q : Explain decrease in taxes in the long run

Q : Calculating default risk premium on corporate bond

Q : Deemed paid foreign tax credit problem

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Request for Solution File

Ask an Expert for Answer!!

Finance Basics: Calculating default risk premium on corporate bond

Reference No:- TGS053113

Recent Questions Asked Finance Basics

Q : Prepare a master budget for each month

Q : Incremental cash flows and npv

Q : Problem based on shares of treasury stock

Q : Explain decrease in taxes in the long run

Q : Calculating default risk premium on corporate bond

Q : Deemed paid foreign tax credit problem

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