What is default risk premium on the corporate bonds

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Reference no: EM131315163

A company's 5-year bond are yielding 7.75% per year. The real risk-free rate (r*) is 2.3%. The average inflation premium is 2.5%; and the maturity risk premium is estimated to be 0.1 x (t-1)%, where t= number of years to maturity. If the liquidty premium is 1%, what is the default risk premium on the corporate bonds.

Reference no: EM131315163

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