1. The real risk-free rate is 2%, and inflation is expected to be 4% for the next 2 years. A 2-year Treasury security yields 8.25%. What is the maturity risk premium for the 2-year security? Round your answer to two decimal places.
2. Default Risk Premium: A Treasury bond that matures in 10 years has a yield of 5.75%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.
3. Expected Interest Rate::The real risk-free rate is 2.25%. Inflation is expected to be 2.5% this year and 3.75% during the next 2 years. Assume that the maturity risk premium is zero.
A- What is the yield on 2-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places.
B- What is the yield on 3-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places.