Currently,a three-month Treasury bill has a yield of 5% while the yield on a ten-year Treasury bond is 4.7%.What is the risk premium of the typical A-rated ten-year corporate bond with a yield of 5.5%?
A) 0.5%
B) 0.8%
C) 1.17%
D) 5.5%

Question

Quizplus · Accepted Answer

The risk premium of the A-rated ten-year corporate bond is calculated by subtracting the yield of the ten-year Treasury bond (which is considered risk-free) from the yield of the corporate bond. Therefore, 5.5% (corporate bond yield) - 4.7% (ten-year Treasury bond yield) = 0.8%.

Currently,a Three-Month Treasury Bill Has a Yield of 5% While