Question 11 (4 points) You read in the Wall Street Journal that three-month Treasury bills currently yield 6.50 percent. Your brother-in-law, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums: Inflation risk premium Liquidity premium Maturity risk premium Default risk premium 0.50% 1.00% 2.00% 009 Based on these data, the real risk-free rate of return must be (approximately): Your Answer: Answer units Question 12 (4 points) Suppose the return on a 10-year Treasury bond is 8.20 percent and that on a 10-year Treasury Inflation Protected Security (TIPS) is 1.00 percent. Suppose also that the maturity risk premium on all 10-year bonds is 0.90 percent and that no liquidity risk premium is required on any Treasury security. The expected average inflation rate for the next 10 years is (approximately): Your Answer: Answer units Question 13 (4 points) If 10-year T-bonds yield 5.20 percent, 10-year corporate bonds yield 8.50 percent, the maturity risk premium on all 10-year bonds is 1.10 percent, and the liquidity risk premiums for corporate and Treasury bonds are 0.60 percent and 0.00 percent, respectively, what must be the default risk premium on the corporate bond? Your Answer: Answer units