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Calculating the default-risk premium) At present, 10-year Treasury bonds are yield- ing 4% while a 10-year corporate bond is yielding 6.8%. If the liquidity-risk premium on the corporate bond is 0.4%, what is the corporate bond’s default-risk premium? 2-2. (Calculating the maturity-risk premium) At present, the real risk-free rate of inter- est is 2%, while inflation is expected to be 2% for the next 2 years. If a 2-year Treasury note yields 4.5%, what is the maturity-risk premium for this 2-year Treasury note? 2-3. (Inflation and interest rates) You’re considering an investment that you expect LO4 will produce an 8% return next year, and you expect that your real rate of return on this investment will be 6%. What do you expect inflation to be next year? 2-4. (Inflation and interest mates) What would you expect the nominal rate of interest to be if the real rate is 4% and the expected inflation rate is 7%? 2-5. (Inflation and interest rates) Assume the expected inflation rate to be 4%. If the current real rate of interest is 6%, what ought the nominal rate of interest to be?


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