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The real rate of interest is 4% and is expected to remain constant for the next 5 years. Inflation is expected to be 2% next
The real rate of interest is 4% and is expected to remain constant for the next 5 years. Inflation is expected to be 2% next year, 3.5% the following year, 5% the third year, and 5% on the fourth year. The maturity risk premium is expected to be 0.3 * (t-1)%. The liquidity premium on relevant 5-year securities is 0.75%. What is the default risk premium on a treasury bond assuming a yield of 8%
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