Q 10.26. An IBM bond promising to pay $100,000 costs $90,090. Time-equivalent Treasuries offer 8%.

1. Let's presume for a moment-just for this question-that the financial markets are neither risk-neutral nor perfect. What can you say about other premia in IBM's quoted interest rate? (These premiums will be explained in future chapters; they include the risk premium, the default premium, and the liquidity premium.) 2. Let's presume for a moment that the financial markets are now risk-neutral. What can you say about other premiums in IBM's quoted interest rate? (These premiums will be explained in future chapters; they include the risk premium, the default premium, and the liquidity premium.) 3. Assuming that the liquidity premium is 0.5%, what can you say about the risk premium, the default premium, and the liquidity premium?