1.

Assume you observe a 10-year bond with nominal rate of 8.0%. Further assume that for this 10-year bond the inflation premium is 2.25%, the liquidity risk premium is 0.25%, the maturity risk premium is 1.00%, and there are no special provisions on the bond that warrant a premium. If you assume the real, risk-free rate is 3.25%, what is the default risk premium for this bond?

2.

You observe a AAA corporate bond with a 20-year maturity (without any special provisions) is currently paying 6.75% and a 20-year Treasury is paying 5.50%. Assume, for 20-year bonds, the inflation premium is 2.75%, the liquidity risk premium is 0.25%, the maturity risk premium is 1.00%, and none of those three premiums currently explain the difference between the AAA corporate bond and Treasury (in other words, the difference between the two bonds' rates is not due to those three premiums). What is the real risk-free rate implied by the information above?