Question: Attempts: Keep the Highest: /1 6. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate, r*, is 1.6%. Inflation is expected to average 1.4%

Attempts: Keep the Highest: /1 6. Problem 6.13 (Default Risk Premium)

Attempts: Keep the Highest: /1 6. Problem 6.13 (Default Risk Premium) eBook The real risk-free rate, r*, is 1.6%. Inflation is expected to average 1.4% a year for the next 4 years, after which time inflation is expected to average 4.8% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 10.7%, which includes a liquidity premium of 0.4%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places

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