Maturity Risk Premium

A company's 5-year bonds are yielding 6% per year. Treasury bonds with the same maturity are yielding 4.7% per year, and the real risk-free rate (r*) is 2.85%. The average inflation premium is 1.45%, and the maturity risk premium is estimated to be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is

0.6%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.

An investor in Treasury securities expects inflation to be 2.1% in Year 1,2.5% in Year 2 , and 3.75% each year thereafter. Assume that the real risk-free rate is 2.55% and that this rate will remain constant. Three-year Treasury securities yield 6.90%, while 5 -year Treasury securities yield 8.00%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRPs - MRP. Do not round intermediate calculations. Round your answer to two decimal places