1. A company's 5-year bonds are yielding 7% per year. Treasury bonds with the same maturity are yielding 3.8% per year, and the real risk-free rate (r*) is 2.05%. The average inflation premium is 1.35%, and the maturity risk premium is estimated to be 0.1 (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.8%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.

2. Due to a recession, expected inflation this year is only 2.75%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 2.75%. Assume that the expectations theory holds and the real risk-free rate (r*) is 1.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 0.5%, what inflation rate is expected after Year 1? Round your answer to two decimal places.

3. Interest rates on 4-year Treasury securities are currently 6.8%, while 6-year Treasury securities yield 7.85%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

4. Your parents will retire in 15 years. They currently have $370,000 saved, and they think they will need $750,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places.

5. Bank 1 lends funds at a nominal rate of 10% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places.