Question: 1) Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 8 basis

1) Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 8 basis points. Identify as part of your answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium.

3-month T-bills 2.0%

30-year Treasury bonds 5.0%

AA-rated corp. bonds 8.0%

Inflation Rate 1.0%

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