7. Suppose the real rate of interest is 1%, expected inflation is 2%, the default risk on a given bond is 3%, the liquidity premium is 2%, and the maturity premium is 1% a. What is the risk free rate of return? b. What is the interest rate for this bond? 8. You are considering an investment in the stock of Established Brands, Inc (EBI). The current price of EBI is $20.00. EBI pays a quarterly dividend of $.25. If EBI stock rises to $22.00 per share at the end of one year, what will your one-year rate of return on EBI be? 9. Suppose you think there is a 20% chance that EBI will fall to $18.00 in one year, a 60% chance its price will be unchanged, and a 20% chance that its price will rise to $24.00. Calculate the expected return on EBI. 10. EBI is trading at $20.00 per share. There are 2,000,000 shares outstanding, out of 10,000,000 shares authorized. a. What is EBI's market capitalization (market cap)? b. Suppose EBI issues a 10% stock dividend. What will its new market cap and share price be