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DEFAULT RISK PREMIUM The real risk-free rate, r, is 1.65%. Inflation is expected to average...

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DEFAULT RISK PREMIUM The real risk-free rate, r, is 1.65%. Inflation is expected to average 2.75% a year for the next 4 years, after which time inflation is expected to average 3.85% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 11.15%, which includes a liquidity premium or 0.55%. What is its default risk premium? Do not round Intermediate calculations. Round your answer to two decimal places. % we Future interest Rates EXPECTATIONS THEORY One year Treasury securities vield 3.05%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6.3%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places %

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