Following is information about three bonds:

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                                            Issuer                  Yield                Time to Maturity

                                       Treasury                   2.0%            6 months

                                       Company A        5.0                         5 years

                                       Company B              5.3                         8 years

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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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