The correct answer is A. 7.00%.
The bond risk premium is the additional return that investors demand for holding a risky bond over a risk-free bond. It is calculated as the difference between the yield on a risky bond and the yield on a risk-free bond. In this case, the yield on a risky bond is 16% and the yield on a risk-free bond is 9%, so the bond risk premium is 7%.
Option B is incorrect because it is the yield on the risk-free bond. Option C is incorrect because it is the difference between the yield on the risky bond and the risk-free bond divided by the yield on the risky bond. Option D is incorrect because it is the yield on the risky bond multiplied by 100.
The bond risk premium is important because it helps investors to determine the expected return on a risky bond. The higher the bond risk premium, the higher the expected return on the bond. This is because investors demand a higher return for taking on more risk.