8. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate, r*, is 1.4%. Inflation...
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8. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate, r*, is 1.4%. Inflation is expected to average 1.2% a year for the next 4 years, after which time inflation is expected to average 3,9% a year. Assume that there is no maturity risk premium. A 10-year corporate bond has a yield of 9.7%, which includes a liquidity premium of 0.2% What is its default risk premium? Do not round Intermediate calculations. Round your answer to two decimal places
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