1. The 15 year Treasury bonds are yielding 4.75% while a 10 year AA rated corporate bond yields 7.25%. The maturity risk premium of this Treasury Bond is 0.35%. If the liquidity premium and default risk premium on this corporate bond is 0.75% and 1.25% respectively, calculate its maturity risk premium.
A. 0.85%. B. 0.15%. C. 0.5%. D. 0%.
2. The 15 year Treasury bonds are yielding 3.75% while a 15 year AAA rated corporate bond yields 6.25%. If the liquidity premium on this corporate bond is 0.75%, what is the default risk premium of Treasury Bond?
A. 1.75%. B. 0%. C. 2.50%. d. 3.25%.