Default risk premium on the corporate bond

Assignment Help Financial Management
Reference no: EM131047234

A Treasury bond that matures in 9 years has a yield of 3.1%. A 9-year corporate bond has a yield of 7.28%. Assume that the liquidity premium on the corporate bond is 0.34%. What is the default risk premium on the corporate bond? State you answer as a percentage to 2 decimal places.

Reference no: EM131047234

Questions Cloud

Onsider purchasing if your goal is lower unsystematic risk : Which type of bond should you consider purchasing if your goal is to lower unsystematic risk?
What is the book value of shareholders equity : Martha's Enterprises spent $2,500 to purchase equipment three years ago. This equipment is currently valued at $2,000 on today's balance sheet but could actually be sold for $2,200. Net working capital is $300 and long-term debt is $900. Assuming the..
Sometimes referred to as free debt financing : Which of the following is sometimes referred to as "free debt financing"? In other words, the borrower does expect to pay what they owe, but the lender does not expect to earn a rate of return (interest) on any money they are owed, if that money is p..
What were your bank charges on this loan for that one month : You have a revolving credit agreement with a bank for $10 million with an annual interest fee of 7% and an annual commitment fee of 0.20% on unborrowed funds. During October you borrowed $6 million. What were your bank charges on this loan for that o..
Default risk premium on the corporate bond : A Treasury bond that matures in 9 years has a yield of 3.1%. A 9-year corporate bond has a yield of 7.28%. Assume that the liquidity premium on the corporate bond is 0.34%. What is the default risk premium on the corporate bond?
Growth rate in earnings per share : 10 years ago, Weed Go Inc. earned $0.98 per share. Its earnings this year were $2.01. What was the growth rate in earnings per share (EPS) over the 10-year period? State your answer as a percentage to two decimal places (e.g. 16.38%).
Use the duration valuation equation : A bond is scheduled to mature in five years. Its coupon rate is 9 percent with interest paid annually. This $1,000 par value bond carries a yield to maturity of 10 percent. Calculate the percentage change in this bond's price if interest rates on com..
What is the intial margin required margin : A trader writes three naked put option contracts on the S&P 500. The option price is $6, the strike price is 16700 ($167) and the current price is 17000 ($170). What is the intial margin required margin?
What is the cost of the lease : You agree to lease a car for 5 years by paying $300 per month. You are not required to pay any money up front or at the end of your agreement. Your opportunity cost of capital is 6% APR (Annual Percentage Rate). What is the cost of the lease (Present..

Reviews

Write a Review

Financial Management Questions & Answers

  Considered to be the best capital budgeting decision tool

Which of the following investment evaluation tools is considered to be the best capital budgeting decision tool? Gordon’s Bird-in-the-hand” argument suggests that _____. According to the residual theory of dividends, if a a firm’s equity need is less..

  What was the annual growth rate of the property

Suppose a customer's house increased in value over five years from $ 150,000 to $ 250,000. What was the annual growth rate of the property value during this five-year interval? Three local banks pay different interest rates on time deposits with one-..

  Regression models-describe multiple regression analysis

What benefit does a variable provide when developing and examining models? Explain the purpose of simple linear regression and scatter diagrams. Please provide a simple linear regression model and define each variable used. Describe multiple regressi..

  Banks typically pay interest on an annual basis

Banks typically pay interest on an annual basis. Banks typically pay interest on a daily basis. Bond holders are usually paid on a semi-annual basis

  How much would legacy be worth today-annual compounding

The great, great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%, how much would this legacy be worth today? Assume annual compounding.

  Security exchanges create efficient markets

security exchanges create efficient markets that do all of the following except

  Financial institution is planning to give a loan

The assignment may be submitted as an Excel spreadsheet or an electronic (Word or PDF) document. A financial institution is planning to give a loan of $5 million to a firm. It expects to charge an up-front fee of 0.20% and a service fee of 5 basis po..

  Explain what a leveraged buyout

Explain what a leveraged buyout (LBO) is. Define the term divestiture and briefly discuss the major types of divestitures. Provide reasons a company might consider a divestiture.

  Calculate the net investment for the new line

Delivery and installation of the new line are expected to cost an additional $100,000. Assuming Fleming's marginal tax rate is 40 percent, calculate the net investment for the new line.

  What type of analysis has the risk team performed

What type of analysis has the risk team performed and how do you arrive at this answer? If you were a board member, what issues might you have with this way of reporting VaR?

  What must the coupon rate be on these bonds

DMA Corporation has bonds on the market with 18.5 years to maturity, a YTM of 6.5 percent, and a current price of $1,048. The bonds make semi annual payments and have a par value of $1,000. What must the coupon rate be on these bonds?

  Margin call price and account equity

You short sold 800 shares of stock at a price of $45 and an initial margin of 55 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd