Question 2 Within the bond market, there are risky and risk free (or risk-less) bonds available to investors. We can assume that the payback of the risky bonds is at least equal to the risk free bonds, giving us the following equation: (1+i)p 1-p with i the nominal interest rate, p the probability of default on the bond and x the risk premium. If nominal interest rate is 2.8% and risk of default is 6%, what is the risk premium?