Default Risk Premium
A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield of 8.5%. Assume that the liquidity premium on the corporate bond is 0.55%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.
___________%
Expected Interest Rate
The real risk-free rate is 2.8%. Inflation is expected to be 3.25% this year, 4.85% next year, and 2.85% thereafter. The maturity risk premium is estimated to be 0.05(t - 1)%, where t= number of years to maturity. What is the yield on a 7-year Treasury note? Do not round your intermediate calculations. Round your answer to two decimal places.
___________%