Problem:
Assume you make the following investment: a $10,000 investment in a 10year T-bond taht has a yield of 10.5% and A $20,000 investment in a 10 year corporate bond with an Baa rating and a yield of 13.7%. Based on this information,
Required:
Question 1: What is your estimate of the corporate bond's default risk premium? Please describe in detail.