21. If the real rate of interest is 3%, expected inflation is 2%, the default risk premium is 6%, the liquidity premium is 2%, and the maturity premium is 2% for an instrument, what will be the required rate of return for that instrument? 22. What is the difference between fixed rate and floating rate debt? 23. Two investments have the same expected rate of return, but investment A has a greater variance in the distribution of its expected return than investment B. a. Which investment would a risk-averse investor choose? A risk-loving investor? A risk- neutral investor? Why? b. If most investors are risk averse, what will happen to the price of investment A vs. the price of investment B? 24. A company has $3 million in debt and $2 million in equity. The interest rate on its debt is 7%, and the required rate of return on its equity is 20%. Its effective tax rate is 30%. What is its weighted average cost of capital (WACC)