10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9%, the maturity risk premium on all 10- ear bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T- onds, what is the default risk premium on the corporate bond? Select the correct answer. O a. 2.64% O b. 2.16% c.2.88% O d. 2.40%

10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9%, the maturity risk premium on all 10- ear bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T- onds, what is the default risk premium on the corporate bond? Select the correct answer. O a. 2.64% O b. 2.16% c.2.88% O d. 2.40%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Answer number 1 and 2: 1.) Niendorf Corporation's 5-year bonds yield 8.00%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t − 1) × 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorf's bonds? 2.) Kop Corporation's 5-year bonds yield 6.50%, and T-bonds with the same maturity yield 4.40%. The default risk premium for Kop's bonds is DRP = 0.40%, the liquidity premium on Kop's bonds is LP = 1.70% versus zero on T-bonds, the inflation premium (IP) is 1.50%, and the maturity risk premium (MRP) on 5-year bonds is 0.40%. What is the real risk-free rate, r*?
f 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9%, the maturity risk premium on all 10- wear bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T- bonds, what is the default risk premium on the corporate bond? Select the correct answer. O a. 2.64% O b. 2.16% O c. 2.88% d. 2.40% e. 3.12% Please give proper solution and without plagiarism
If 8-year T-bonds have a yield of 6.36%, 8-year corporate bonds yield 8.36%, the maturity risk premium on all 8-year bonds is 1.22%, and corporate bonds have a 0.35% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Group of answer choices 1.77% 1.75% 1.80% 1.65% 1.62%
Q1) He Omani Company has two bond issues outstanding. Both bonds pay OMR (100) annual interest plus OMR (1000) face value at maturity. Bond L has a maturity of 15 years, sell after three years issued, and Bond S has a maturity of 1 year. A. What will be the value of each of these bonds when the going rate of market interest is 12%? B. what can you conclude from the results of the above questions regarding the bond risks?
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.50%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds? 3.33 % 2.95% 2.92% 2.68 % 2.86 %
Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.6% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?Answer 0.38%0.50%0.40%0.59%0.56%
Mansell Corporation's 5-year bonds yield 6.80% and 5-year T-bonds yield 5.80%. The real risk-free rate is r* = 1.80%, the inflation premium for 5-year bonds is IP = 3.50%, the liquidity premium for Mansell’s bonds is LP = 0.60% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t) × 0.10%, where t = number of years to maturity. What is the default risk premium (DRP) on Mansell’s bonds? a. 0.30% b. 0.40% c. 0.50% d. 0.60% e. 0.70%
Hilpert Inc. 10-year bonds yield 5.2% and 10-year corporate bonds yield 7.5%. The maturity risk premium on a 10-year bond is 1.1% and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Group of answer choices 1.30% 1.00% 1.20% 1.10%
Lee Corp.'s 5-year bonds yield 7.50% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for Kay's bonds is DRP = 1.40% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) ×0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Kay's bonds?
Koy Corporation's 5-year bonds yield 7%, and 5-Year T-bonds yield 5.15%. The real risk-free rate is r*=3%, the inflation premium for 5=year bonds is IP=1.75%, the liquidity premium for Koy s bonds is LP=.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP=(t-1)*.1%, where t=number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? B. 6.6 is the answer. Pls this ans should match.
Flagstaff Inc's 5-year bonds yield 7.00% and 5-year T-bonds yield 5.80%. The real risk-free rate is r* = 3.5%, the default risk premium for the bonds is DRP = 0.90%, the liquidity premium on Flagstaff's bonds is LP = 0.30% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds?
If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9.2%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?

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