2) Assume that we have only five different investment alternative. These alternatives are given below. There are only two two-year, two eight-year maturity and one seven year maturity investments. The table also provides the maturity, liquidity, and default risk characteristics of a new investment possibility (Investment 3 / 7 years to maturity). All investment alternatives are zero coupon bonds with a single face value payment at the maturity. Assume that inflation premium, liquidity premium, and default risk premium are constant across all time horizons. 2 Investment Maturity (in Years) Liquidity Default Risk Interest Rate (%) 1 High Low 2.0 2 2 Low Low 2.5 3 7 Low Low 13 4 High Low 4.0 Low High 6.5 8 5 8 Based on the information in the above table: a) Explain the difference between the interest rates on Investment 1 and Investment 2. b) Estimate the default risk premium. c) Calculate upper and lower limits for the interest rate on Investment 3, is