A company’s 5-year bonds are yielding 7% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is2.75%. The average inflation premium is 2.05%, and the maturity risk premium is estimated to be 0.1 3 (t 2 1)%, where t 5 number of years to maturity. If the liquidity premium is 0.7%, what is the default risk premium on the corporate bonds?
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A company’s 5-year bonds are yielding 7% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*
) is
2.75%. The average inflation premium is 2.05%, and the maturity risk premium is estimated to be 0.1 3 (t 2 1)%, where t 5 number of years to maturity. If the liquidity premium is 0.7%, what is the default risk premium on the corporate bonds?
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- A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 5.1% per year, and the real risk-free rate (r*) is 2.35%. The average inflation premium is 2.35%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.9%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.A company's 5-year bonds are yielding 8% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk - free rate (r*) is 2.65 % . The average inflation premium is 2.15%, and the maturity risk premium is estimated to be 0.1 \times (t-1) %, where t = number of years to maturity. If the liquidity premium is 0.7 %, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.A company's 5-year bonds are yielding 8.25% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is 2.75%. The average inflation premium is 2.05%, and the maturity risk premium is estimated to be 0.1(t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.7%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
- A company’s 5-year bonds are yielding 7% per year. Treasurybonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is2.75%. The average inflation premium is 2.05%, and the maturity risk premium is estimatedto be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is0.7%, what is the default risk premium on the corporate bonds?A company's 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk free rate (r*) is 2.3%. The average inflation premuim is 2.5% and the maturity risk premium is estimated to be 0.1X(t-1) % where t= the number of maturity. If the iquidity premium is 1% what is the default risk premium on the corporate bonds.? Please show formula and calculation. Do it in manual computation not in spreadsheet.Suppose the real risk-free rate of interest is r=4% and it is expected to remain constant over time. Inflation is expected to be 1.60% per year for the next two years and 3.90% per year for the next three years. The maturity risk premium is 0.1 x (t-1) %, where t is number of years to maturity, a liquidity premium is 0.45%, and the default risk premium for a corporate bond is 1.40%, The average inflation during the first 4 years is What is the yield on a 4-year Treasury bond? O 6.75% O 8.90% O 4.30% O 7.05% What is the yield on a 4-year BBB-rated bond? O 7.50% O 7.05 % O 8.45% 8.90% If the yield on a 5-year Treasury bond is 7.38% and the yield on a 6-year Treasury bond is 7.83%, the expected inflation in 6 years is (Hint: Do not round intermediate calculations.)
- The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 4% per year for each of the next two years and 3% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Global Satellite Corp.’s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Global Satellite Corp. issues 15-year, AA-rated bonds. What is the yield on one of these bonds?The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 6% per year for each of the next two years and 5% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t-1) %, where t is the security's maturity. The liquidity premium (LP) on all National Transmissions Corp.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating U.S. Treasury AAA AA A BBB O 5.25% O9.49% National Transmissions Corp. issues 7-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 10.54% Default Risk Premium 9.94% 0.60% 0.80% 1.05% 1.45% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? O The yield on U.S. Treasury securities always remains static. O In theory, the yield on a bond…The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 4% per year for each of the next four years and 3% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Rink Machine Co.’s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Rink Machine Co. issues fourteen-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 7.94% 9.24% 8.19% 5.95% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? An AAA-rated bond has less default risk than a…
- The real risk-free rate of interest, r*, is 3%. Inflation is expected to be 4% this year, 5 percent next year, and 3% per year thereafter. The maturity risk premium equals 0.1%(t - 1), where t equals the bond’s maturity. That is, a 5-year bond has a maturity risk premium of 0.4% or 0.004. A 5-year corporate bond yields 8%. What is the yield on a 10-year corporate bond that has the same default risk and liquidity premiums as the 5-year corporate bond? 8.4% 7.2% 8.2% 6.8% 8.0%The real risk-free rate of interest, r*, is 3%. Inflation is expected to be 4% this year, 5 percent next year, and 3% per year thereafter. The maturity risk premium equals 0.1% (t-1), where t equals the bond's maturity. That is, a 5-year bond has a maturity risk premium of 0.4% or 0.004. A 5-year corporate bond yields 8%. What is the yield on a 10-year corporate bond that has the same default risk and liquidity premiums as the 5-year corporate bond? A. 7.2% B. 8.0% C. 6.8% D. 8.2% E. 8.4%The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 3% per year for each of the next two years and 2% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Moq Computer Corp.’s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Moq Computer Corp. issues 15-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 7.68% 6.28% 5.55% 7.13% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? The yield on a AAA-rated bond will be lower than…