Question: 13. Problem 6.13 (Default Risk Premium) ELE eBook The real risk-free rate, r*, is 1.3%. Inflation is expected to average 1.2% a year for the

13. Problem 6.13 (Default Risk Premium) ELE eBook The real risk-free

13. Problem 6.13 (Default Risk Premium) ELE eBook The real risk-free rate, r*, is 1.3%. Inflation is expected to average 1.2% a year for the next 4 years, after which time inflation is expected to average 3.8% a year. Assume that there is no maturity risk premium. A 9-year corporate bond has a yield of 11.7%, which includes a liquidity premium of 0.7%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %

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