The correct answer is: D. high yield premium.
Bonds issued by small companies tend to have a higher yield premium than bonds issued by large companies. This is because small companies are considered to be more risky than large companies, so investors demand a higher return to compensate for the extra risk.
A liquidity premium is a premium that investors demand for holding assets that are less liquid. Liquidity refers to how easily an asset can be bought or sold without affecting its price. Assets that are more liquid, such as government bonds, tend to have a lower liquidity premium than assets that are less liquid, such as corporate bonds.
An inflation premium is a premium that investors demand to compensate for the expected rate of inflation. Inflation is a general increase in prices over time. When prices are expected to rise, the value of money decreases. This means that investors need to be compensated for the fact that their money will be worth less in the future.
A default premium is a premium that investors demand to compensate for the risk that the issuer of the bond will default on its debt. Default occurs when an issuer is unable to make the payments on its debt. When the risk of default is high, investors demand a higher return to compensate for the extra risk.