Question: 5. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate, r*, is 1.5%. Inflation is expected to average 1.2% a year for the next

5. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate,

5. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate, r*, is 1.5%. Inflation is expected to average 1.2% a year for the next 4 years, after which time inflation is expected to average 4.3% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 10.0%, which includes a liquidity premium of 0.3%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %

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