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How to Calculate a Default Risk Premium

By Motley Fool Staff – Updated Apr 29, 2025 at 10:31 PM

Key Points

  • Bonds' interest rates combine risk-free rate, inflation, liquidity, maturity, and default risk premiums.
  • High-risk companies offer higher interest rates to compensate for possible default risks.
  • Calculate default risk premium by subtracting combined premiums from a bond's total APY.
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