Following Is Information About Three Bonds:
?
Although None of the Bonds Has a Liquidity Premium

question 39

Multiple Choice

Following is information about three bonds:
? $\begin{array} { l l c } { \text { Issuer } } & \text { Yield } & \text { Time to Maturity } \\\hline\text { Treasury } & 2.0 \% & 6 \text { months } \\\text { Company A } & 5.0 & 5 \text { years } \\\text { Company B } & 5.3 & 8 \text { years }\end{array}$
?
Although none of the bonds has a liquidity premium, any bond with a maturity equal to one year or greater has a maturity risk premium (MRP) . Except for their terms to maturity, the characteristics of the Company A and Company B bonds are the same (including their default risk) . The average inflation rate is expected to remain constant during the next 10 years. What is the default risk premium (DRP) associated with the bonds issued by Company A and Company B?

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