A corporate bond has a nominal interest rate of 13%. The bond isnt very liquid, and thus has a 2%

liquidity premium. The bond is rated B, and therefore has a default risk premium of 2.5%. The bond is

also due in 20 years, which results in a maturity risk premium of 1.5%.. Open to all

(a) compute the nominal interest rate on a long-term Treasury bond _________

(b) what is the real rate of return on the Treasury bond if the market rate included a 2.5% inflation premium? __________