$7)$ Lee Corp.$\text{'}$s $5-$year bonds yield $7\mathrm{.}80\%$ and $5-$year T$-$bonds yield $5\mathrm{.}20\%.$ The real risk$-$free

rate is $r^{**}=2\mathrm{.}5\%,$ the inflation premium for $5-$year bonds is $IP=1\mathrm{.}50\%,$ the default risk premium for Lee's

bonds is $DRP=1\mathrm{.}50\%$ versus zero for $T-$bonds, and the maturity risk premium for all bonds is found with

the formula MRP $=(t-1)0\mathrm{.}3\%,$ where $t=$ number of years to maturity. What is the liquidity premium

$($LP$)$ on Kay's bonds?

$8)$ Tom Corp.$\text{'}$s bonds currently sell for $$1,005$ with a $7\mathrm{.}5\%$ coupon paid semiannually and a

$15-$year maturity. However, the bonds can be called in $6$ years at $$1,035.$ Assume that no costs other than

the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is

horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what

rate of return $($annual$)$ should an investor expect to earn if he or she purchases these bonds?$|$