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To raise funds for Gravina Island Bridge, the Government of Alaska issued bonds. The bonds have a ...

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To raise funds for Gravina Island Bridge, the Government of Alaska issued bonds. The bonds have a ...

To raise funds for Gravina Island Bridge, the Government of Alaska issued bonds. The bonds have a face value of $1,000, 15 years to maturity and a 7% coupon rate (annual coupons with the first coupon due in one year). The bonds are priced to yield 10%. U.S. Government T-Bonds with a 7% (annual) coupon rate and 15 years to maturity currently yield 7%. What is the default risk premium applied to the Gravina Bridge Bonds? (Assume that the Gravina bonds have the same liquidity risk premium as the T-Bonds.)

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Corporate Finance Online

Edition: 2^nd

Authors: Eakins, McNally

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