Default Risk Premium
A Treasury bond that matures in 10 years has a yield of 5.25%. A 10-year corporate bond has a yield of 9.75%. 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.
%
Maturity Risk Premium
The real risk-free rate is 2.25%, and inflation is expected to be 3.75% for the next 2 years. A 2-year Treasury security yields 8.5%. What is the maturity risk premium for the 2-year security? Round your answer to two decimal places.
%