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2) The real risk-free rate is 3.5%. Inflation is expected to average 3.x% a year for the next 3 years, thereafter inflation is expected to

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2) The real risk-free rate is 3.5%. Inflation is expected to average 3.x% a year for the next 3 years, thereafter inflation is expected to average 4.x% a year. A 12-year corporate bond has a yield of 9.3%. Assume that there is no maturity risk premium. Liquidity premium on the corporate bond is 0.x%. What is the default risk premium? (15 pts) 2) The real risk-free rate is 3.5%. Inflation is expected to average 3.x% a year for the next 3 years, thereafter inflation is expected to average 4.x% a year. A 12-year corporate bond has a yield of 9.3%. Assume that there is no maturity risk premium. Liquidity premium on the corporate bond is 0.x%. What is the default risk premium? (15 pts)

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