27Jan How do you caluclate a corporate bond default rate premium?
financefordummies asked:
A Treasury Bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the
default risk premium on the corporate bond?
How do you calculate this?
A Treasury Bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the
default risk premium on the corporate bond?
How do you calculate this?
Tags: corporate
January 28th, 2009 at 5:28 am
It appears to me that: YTM-Liquidity-Risk free = default risk premium…
YTM = 9%
Liquidity = 0.5%
Risk free = 6%
9%-0.5%-6% = 2.5%