1. At present, 20-year Treasury bonds are yielding 6.5% while some 20-year corporate bonds that you are interested in are yielding 10.5 %. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is 0.50% while it is 0.0% on the Treasury bonds, what is the default-risk premium on the corporate bonds? Note that a Treasury security should have no default-risk premium. (5p)