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2. Suppose the 10-year T-bonds are currently yielding 5.8%. You are also given the following information about economic activity and ABC Corporation bonds: -

2. Suppose the 10-year T-bonds are currently yielding 5.8%. You are also given the following information about economic activity and ABC Corporation bonds: - Inflation premium = 3.25% Liquidity premium = 0.6% - Maturity risk premium = 1.85% - Default risk premium = 2.15% a. What is the real risk-free rate of return? (2 points) b. What is the fair interest rate on an ABC Corp. 10-year bond? (2 points)

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