Default Risk Premium

A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 8.25%. Assume that the liquidity premium on the corporate bond is 0.25%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

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Expectations Theory

Interest rates on 4-year Treasury securities are currently 6.6%, while 6-year Treasury securities yield 7.25%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Round your answer to two decimal places.

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