The text presents a formula where

(1+i)=(1p)(1+i+x)+p(0)

where

i- is the nominal interest rate on a riskless bond

x- is the risk premium

p- is the probability of default(bankruptcy)

If the probability of bankruptcy iszero, the rate of interest on the risky bond is i

.

When the nominal interest rate for a risky borrower is 11% and the nominal policy rate of interest is 2%, the probability of bankruptcy is _________%. (Round your response to two decimal places.)

When the probability of bankruptcy is 3% and the nominal policy rate of interest is 3%, the nominal interest rate for a risky borrower is ___________%. (Round your response to two decimal places.)

When the probability of bankruptcy is 8% and the nominal policy rate of interest is 3%, the nominal interest rate for a risky borrower is ___________%. (Round your response to two decimal places.)