A Treasury bond that matures in 10 years has a yield of 8%. A 10-year corporate bond has a yield of 12%and liquidity premium of 2%. What is the default risk premium on the corporate bonds

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 14MC
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  1. A Treasury bond that matures in 10 years has a yield of 8%. A 10-year corporate bond has a yield of 12%and liquidity premium of 2%. What is the default risk premium on the corporate bonds?
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