1. The return on a 30 -year Treasury Bond is 8%. A similar 30 -yr corporate bond has a total return of 11% and has

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1. The return on a 30 -year Treasury Bond is 8%. A similar 30 -yr corporate bond has a total return of 11% and has a liquidity risk premium of 0.6%. What is the default risk premium of the corporate bond? 

2. ACME, Inc, has an outstanding 5-year bond that yields 8.0% to bondholders. The average real rate of return is 1.5% and the firm faces a liquidity risk premium of 0.2% and 2% default risk premium. ACME, Inc bond has a 1% maturity risk premium. Additionally, ACME, Inc, estimates inflation rates to be 1% for the next four years. What is the expected inflation rate in the fifth year? 

3. Tort, Inc has issued a two-year bond with a yield of 6% per annum. The yield in its one-year bond is 4.5%. If it plans to issue one-year bonds next year, what is the expected yield on this bond? 

4. The yield on a 5-year Treasury Bond is 3.76% and the yield on a rare 4-year Treasury bond is 5.4%. What is the expected one-year interest rate on a 1-year T-Bill in four years? 

5. YOP, Inc has a 3 -year outstanding bond with 13% yield. Investors expect to earn an average of 3% in real rate of return. Inflation is expected to be 1.5%,2.0% and 4% for the next 3 years. Its lack of popularity in the financial market requires it to pay 2.5% for its lack of liquidity, and its relatively short amount of time before maturity only requires a 1.5% maturity risk premium. What is YOP's default risk premium? 

6. A financial analyst wants to estimate the real risk-free interest rate over the next 9 years. The Federal Reserve Bank estimates 9 -year inflation rates to average 2.6% and the local commercial bank currently charges 10% for a 9-year loan. What is the expected real risk-free interest rate over the next 9 years?