The real risk-free rate r is 23 inflation is expected to, Financial Management

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The real risk-free rate r is 23 inflation is expected to

The real risk-free rate, r*, is 2.3%. Inflation is expected to average 2.2% a year for the next 4 years, after which time inflation is expected to average 4.5% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 11.25%, which includes a liquidity premium of 0.95%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %

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