Wall Street Journal reported interest rates of 3.25 percent, 4.50 percent, 5.0 percent, and 6.25 percent for three-year, four-year, five-year, and six-year Treasury note yields, respectively. According to the unbiased expectation theory of the term structure of interest rates, what is the expected one-year rate during year 5?

9.52%

8.05%

5.03%

7.02%

6.42%

A particular security's equilibrium rate of return is 11%. For all securities, the inflation risk premium is 2.75 percent and the real interest rate is 3 percent. The security's liquidity risk premium is .50 percent and maturity risk premium is .75 percent. The security has no special covenants. What is the security's default risk premium? Hint: i* = IP + RIR + DRP + LRP + SCP + MRP

Group of answer choices

6%

4%

2%

5%

3%