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2-12. (Interest rate determination) You're looking at some corporate bonds issued by Ford, and you are trying to determine what the nominal interest rate should

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2-12. (Interest rate determination) You're looking at some corporate bonds issued by Ford, and you are trying to determine what the nominal interest rate should be on them. You have determined that the real risk-free interest rate is 3.0%, and this rate is expected to continue on into the future without any change. In addition, infla- tion is expected to be constant over the future at a rate of 3.0%. The default-risk pre- mium is also expected to remain constant at a rate of 1.5%, and the liquidity-risk premium is very small for Ford bonds, only about 0.02%. The maturity-risk premium is dependent on how many years the bond has to maturity. The maturity-risk premi- ums are as follows: BOND MATURES IN 0-1 year 1-2 years 2-3 years 3-4 years MATURITY-RISK PREMIUM 0.07% 0.35% 0.70% 1.00% Given this information, what should the nominal rate of interest on Ford bonds ma- turing in 0-1 year, 1-2 years, 2-3 years, and 3-4 years be

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