a) Explain in detail what determines risk premium? What does the relation between the expected return on a risky bond and a riskless bond imply? b) Calculate the probability of bankruptcy when the nominal interest rate for a risky borrower is 300% and the nominal policy rate of interest is 100%. c) Calculate the nominal interest rate for a borrower when the probability of bankruptcy is 0.2% and the nominal policy rate of interest is 3%. d) Calculate the nominal interest rate for a borrower when the probability of bankruptcy is 99% and the nominal policy rate of interest is 10%. e) If the payment upon default were zero, would there be any changes in the formula to calculate the risk premium on bonds? Explain how you would you change the formula in this case. a) Explain in detail what determines risk premium? What does the relation between the expected return on a risky bond and a riskless bond imply? b) Calculate the probability of bankruptcy when the nominal interest rate for a risky borrower is 300% and the nominal policy rate of interest is 100%. c) Calculate the nominal interest rate for a borrower when the probability of bankruptcy is 0.2% and the nominal policy rate of interest is 3%. d) Calculate the nominal interest rate for a borrower when the probability of bankruptcy is 99% and the nominal policy rate of interest is 10%. e) If the payment upon default were zero, would there be any changes in the formula to calculate the risk premium on bonds? Explain how you would you change the formula in this case