1. If the 10-year Treasury bond rate is 2.9%, the inflation premium is 2.2%, the maturity-risk premium on 10-year bond is 0.1%,assuming there is no liquidity premium on these bonds, what is the real risk free rate? (Enter percentages as decimals, e.g. 5% = 0.05; and round to 3 decimals)
2. If you were in a position to underwrite debt, which of the following "C's" (Character, Capacity, Capital, Collateral, Condition) do you think are the most important and in what order? Explain.