1. Snow and Co. have 15-year bonds that have an equilibrium rate of return of 9 percent. For all securities, the inflation risk premium is 1.70 percent and the real risk-free interest rate is 3.40 percent. The security's liquidity risk premium is 1.15 percent and the maturity risk premium is 1.75 percent. The security has no special covenants.

Required:

Calculate the bond's default risk premium. Show the formula for full marks.