Finding the default risk premium on the corporate bond
Question:
A Treasury bond that matures in 10 years has a yield of 6%. A 10 year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?
Now Priced at $20 (50% Discount)
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In other words, 7 percent is the rate that equates the net proceeds from the bond with the present value of the future cash flows
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Interest is paid annually;they have a $1000 par value; the coupon interest rate is 8%; and the yield to maturity is 9%. What is the bond's current market price
Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?
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