QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 2.0% per year. What is the real risk-free rate of return, r"? 6.50% 5.00% 4 50% 4004 3.00% QUESTION 14 Suppose 10-year T-bonds have a yield of 4.00% and 10-year corporate bonds yield 6.50%. Also, corporate bonds have a 0.50% liquidity premium versus a zero iquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.20%. What is the default risk premium on corporate bonds? 1.50% 1.70% 2.00% 2.50 2.70% QUESTION 15 Suppose the interest rate on a 2 year T-bond is 0.0% and that on a 3-year T-bond is 7.0%. Assuming the pure expectations theory is correct, what is the market's forecast for 1 year rates 2 year from now? 7.750 8.10% 9.03% 10.03%

QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 2.0% per year What is the real risk-free rate of return"? 6.50% 5.00% 4.50% 4.00% 3.00% QUESTION 14 Suppose 10-year T-bonds have a yield of 4.00% and 10-year corporate bonds yield 6 50% Also, corporate bonds have a 0.50% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.20% What is the default risk premium on corporate bonds? 1.50% 1.70% 2.00% 2.50% 2.70% QUESTION 15 Suppose the interest rate on a 2-year Tbond is 6.0% and that on a 3-year T-bond is 7.0%. Assuming the pure expectations theory is comect, what is the markets forecast for 1-year ratas 2 year from now 7.3% 7.75% 8.16% 9.03% 10.038