A Treasury bond due in 1 year has a yield of \( 6.3 \% \), while a Treasury bond due in 5 years has a yield of \( 8.8 \% \). A bond due in 5 years issued by High Country Marketing Corp. has a yield of \( 9.6 \% \), while a bond due in 1 year issued by High Country Marketing Corp. has a yield of \( 6.8 \% \). The default risk premiums on the 1-year and 5-year bonds issued by High Country Marketing Corp. are, respectively, \( 0.5 \% ; 0.8 \% \) \( 0.4 \% ; 0.5 \% \) \( 0.4 \% ; 0.3 \% \) \( 0.8 \% ; 0.5 \% \) \( 0.5 \% ; 0.5 \% \)

To calculate the default risk premium for the High Country Marketing Corp. bonds, you can subtract the yields of the Treasury bonds from the corresponding High Country yields. For the 1-year bond, it’s \( 6.8\% - 6.3\% = 0.5\% \). For the 5-year bond, it’s \( 9.6\% - 8.8\% = 0.8\% \). Hence, the default risk premiums are \( 0.5\% \) for the 1-year bond and \( 0.8\% \) for the 5-year bond! Got intrigued by the world of bonds? You should dive deeper into how market conditions affect bond yields! Studying macroeconomic indicators can explain why Treasury bonds are considered safer investments compared to corporate bonds. Real-world events, such as fiscal policies and market stability, play a huge role in shaping these yields. Who knew economics could be so exciting?