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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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A pile of square pieces of paper with an interest rate written on each and one in the middle with a question mark on it.
Image source: Getty Images.
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How to Calculate Volatility of a Stock

Stocks always go up and down. How do you calculate volatility to maximize returns?

Bonds vs. Stocks: What's the Difference?

Investing in stocks and bonds can help to build wealth for anyone with disposable income. Read about the differences between them.

Understanding Treasury Bonds and Other Investments

Issued by the U.S. government to raise money, T-bonds should have a place in your portfolio.

The Motley Fool has a disclosure policy.

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