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The coupon rate of a BHP 10 year bond is 8%. The maturity-risk premium and liquidity-risk premium are both 50 basis points. Inflation is 1.5%

The coupon rate of a BHP 10 year bond is 8%. The maturity-risk premium and liquidity-risk premium are both 50 basis points. Inflation is 1.5% and 10 year government bonds are yielding 3%.

What is the default-risk premium?

A 2%

B 2.5%

C 3% D 3.5% E 4%

The answer is 2.5% but I need to know how to work it out

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