Final answer:
Long-term corporate bonds incorporate all the following risk premiums: inflation, default risk, liquidity, and maturity risk premiums, to compensate the investor for various risks associated with long-term lending.
Step-by-step explanation:
Long-term corporate bonds carry various types of risk premiums to compensate investors for the uncertainties associated with lending money. Specifically, they include:
- Inflation Premium: A compensation for the potential decrease in the value of returns due to inflation.
- Default Risk Premium: To account for the possibility that the bond issuer may fail to make the necessary payments.
- Liquidity Premium: Reflecting the risk that the bond may not be easily sold without a discount.
- Maturity Risk Premium: A premium for the risks associated with the long periods before maturity.
Therefore, the correct answer is that long-term corporate bonds contain all of the listed risk premiums.