Computation of default risk premium on the corporate bond

Reference no: EM139911

Computation of default risk premium on the corporate bond and market's forecast for given years.

1.If 10-year T-bonds have a yield of 5.2%, 10-year corporate bonds yield 7.5%, the maturity risk premium on all 10-year bonds 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?

1) 2.00%

2) 2.10%

3) 2.20%

4) 2.30%

2.Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 6.0%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now?

1) 6.65%

2) 6.74%

3) 6.83%

4) 7.01%

Reference no: EM139911

Questions Cloud

What force is being exerted by wire : On an amusement park ride, passengers are seated in the horizontal circle of radius 6.5 m. The seats begin from rest and are uniformly accelerated for 24 seconds to a maximum rotational speed of 1.4 rad/s.

Financial statement in which it will be at fiscal year : ABC INC purchased new machinery in order to improve its production process - Give the value of the new machinery, and list the financial statement in which it will be shown at fiscal year

Determining the variable overhead efficiency variance : The standard hours allowed for actual output of month totaled 7,070 machine-hours. What was the variable overhead efficiency variance for the month?

Purchasing the property on behalf of other person : purchasing the property on behalf of other person whereas Jacobsen did not reveal to Orr the name of the person for whom Jacobsen was making the purchase.

Computation of default risk premium on the corporate bond : Computation of default risk premium on the corporate bond and market's forecast for given years and what is the market's forecast for 1-year rates 1 year from now

Annotated bibliography-geographic-gender-social-cognitive : Nature of geographic, gender, social, cognitive, emotional and growth factors during each and every period of development.

Determine the firm''s net income : Total assets turnover of 2.7 times. Determine the firm's net income and Calculate the firm's ROA

Determining loss with break-even point : Tarrah Company's variable expenses are 72% of sales. The company's break-even point in sales is $2,450,000. If sales are $60,000 below the break-even point, the company would report a:

Find how much long-term debt does the firm have : How much retained earnings do the firm have and find How much long-term debt does the firm have

User Account

All Pages