Intro

A corporate bond with $20$ years to maturity yields $7\mathrm{.}9\%$ and has a liquidity premium of

$1\mathrm{.}4\%.$ The real short$-$term risk$-$free rate is $1\%$ and the average expected inflation rate over

the next $20$ years is $2\%.$ The maturity risk premium is expected to be ${0\mathrm{.}001}^{**}T,$ where $T$ is

the number of years to maturity.

Part $1$

What is the default risk premium on the corporate bond?