If 10year Tbonds have a yield of 62 10year corporate bonds y

If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9.2%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?

Solution

the default risk premium on the corporate bond = 9.2% - 6.2% - 0.4%

the default risk premium on the corporate bond = 2.6%