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A company's 5-year bonds are yielding 8.8% per year. Treasury bonds with the same maturity are...
A company's 5-year bonds are yielding 8.8% per year. Treasury bonds with the same maturity are yielding 6.2% per year, and the real risk-free rate (r*) is 2.60%. The average inflation premium is 3.20%, and the maturity risk premium is estimated to be 0.1 x (t-1)96, where t = number of years to maturity. If the liquidity premium is 1.15%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
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