A Treasury bond that matures in 20 years has a yield of 8%. A 20-year corporate bond has a yield of 11%. Assume that the liquidity premium on the corporate bond is 1.0%. What is the default risk premium on the corporate bond?
a. 0.50%
b. 1.75%
c. 1.00%
d. 1.50%
e. 2.00%
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