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Problem 6-13 Default Risk Premium The real risk-free rate, r*, is 2.6%. Inflation is expected to average 2.9% a year for the next 4 years,

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Problem 6-13 Default Risk Premium The real risk-free rate, r*, is 2.6%. Inflation is expected to average 2.9% a year for the next 4 years, after which time inflation is expected to average 3.65% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 10.6%, which includes a liquidity premium of 0.75%. What is its default risk premium? Round your answer to two decimal places. %

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