1.You read inThe Wall Street Journalthat 30-day T-bills are currently yielding 2%.Your brother-in-law, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums on a 1 year bond:

Liquidity premium = 3%.

Maturity risk premium = 1.5%.

Default risk premium = 1.2%.

On the basis of these data, what is the long term treasury bond rate?

2.A Treasury bond that matures in 10 years has a yield of 4.5 percent.A 10-year corporate bond has a yield of 6 percent.Assume that the liquidity premium on the corporate bond is 0.6 percent.What is the default risk premium on the corporate bond?

3.You read inThe Wall Street Journalthat 30-day T-bills are currently yielding 0.5%.Your brother-in-law, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums on a 1 year bond:

Liquidity premium = 0.5%.

Maturity risk premium = 0.5%.

Default risk premium = 1%.

On the basis of these data, what is the short term corporate bond rate?