What is the default risk premium on the corporate bond

Assignment Help Financial Management
Reference no: EM131010327

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?

Reference no: EM131010327

Questions Cloud

Maturity financial security is expected to have a cash flow : A 35-year maturity financial security is expected to have a cash flow of $230 one year form today. The cash flow is expected to grow at a constant rate of 12% per year for its life. The required rate of return on asset is 14%. What is the maximum pri..
One-year treasury securities yield : One-year Treasury securities yield 5%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities?
Considered a subjective forecasting method : In the model-testing phase of the nine-step process, which of the following refers to that portion of a sample used to evaluate model-forecast accuracy? Which of the following is not considered a subjective forecasting method?
What is the maturity risk premium for two year security : The real risk-free rate is 3%, and inflation is expected  to be 3% for the next 2 years. A 2-year Treasury security yields 6.2%. What is the maturity risk premium for the 2-year security?
What is the default risk premium on the corporate bond : 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?
The expected return on equity and volatility of equity : A single 5-year zero-coupon debt issue with a maturity value of $120 and the expected return on assets of 12%. the expected return on equity, the volatility of equity
Depreciated over five years using the straight-line method : Scott Investors, Inc., is considering the purchase of a $363,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $63,000 in ..
Different between risky portfolio and the risk-free asset : A portfolio has an expected rate of return of 14% and a standard deviation of 22%. The risk-free rate is 4%. An investor has the following utility function:. U = E(r)-1/2(A)σ2 Which value of A makes this investor indifferent between the risky portfol..
Experienced the same number of turns as its peer group : Dana reports Inventory of $2,596,867, Cash of $1,228,073, COGS of $8,086,302, and Accounts Receivable of $2,359,372. Its benchmark peer group turns its inventory 7.7 times a year. What would Dana's new inventory level be if it experienced the same nu..

Reviews

Write a Review

Financial Management Questions & Answers

  How many bonds they need to issue

X Corporation’s outstanding bonds have a $1,000 par value, a 6% semi annual coupon, 3 years to maturity and a 8% YTM. What is the bond’s price? If X Corporation needs to raise 2 million, how many bonds they need to issue?

  Professional analysis of the companys financial statement

Professional analysis of the company's Financial statement and P/L and cash flow statement. No paper writing is needed. Just some graphs and proper analysis of the company as a finance professional. some details are included in the paper

  Offered an investment plan

You have $16,000 you want to invest for the next 32 years. You are offered an investment plan that will pay you 8 percent per year for the next 16 years and 12 percent per year for the last 16 years. How much will you have at the end of the 32 years?..

  Assume bond is annual

Can you show me what the formula looks like? Calculate the price of a $1,000 par value bond that is outstanding at 8% interest. The bond will mature in 25 years and the current yield is 10%. ASSUME THIS BOND IS ANNUAL.

  Financial management and markets

Problems on Financial Management and Markets

  What is its self-supporting growth rate

Maggie's Muffins, Inc., generated $4,000,000 in sales during 2013, and its year-end total assets were $2,400,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, How large a sales increase can the..

  What is the future value of this cash flow stream

Krysel Inc. is expecting a new project to start producing cash flows, beginning at the end of this year. They expect cash flows to be as follows: Year 1 $663,547 Year 2 $698,214 Year 3 $795,908 Year 4 $798,326 Year 5 $755,444 If they can reinvest the..

  The deposit pays interest semi-annually

What APR is being earned on a deposit of $5,000 made 10 years ago today if the deposit is worth $9,948.94 today? The deposit pays interest semi-annually.

  Present value of the investment

An investment offers $3,300 per year for 19 years, with the first payment occurring one year from now. If the required return is 8 percent, the present value of the investment is $___. If the payments occurred for 34 years, the present value of the i..

  What is one share of stock worth today if rate of return

A preferred stock pays an annual dividend of $2.60. What is one share of this stock worth today if the rate of return is 11.75%

  About the total cost of college

You figure that the total cost of college will be $100,000 per year 18 years from today. If your discount rate is 8% compounded annually, what is the present value today of four years of college costs starting 18 years from today? (Round to the neare..

  Recommendations concerning the type of reinsurance plan

Assume you are an insurance consultant who is asked to give recommendations concerning the type of reinsurance plan or arrangement to use. Company A is an established insurer and is primarily interested in having protection against a catastrophic los..

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