AU.S. Treasury bond maturing in 10-years has a yield-to-maturity of 3.25%. When comparing to inflation-protected Treasury bonds, it's evident therealinterest rate you are earning is 1.25%.

a) According to modern term structure theory, what risk-premia are you being compensated for in the additional 2.00%?

b) Explain why you would expect a 10-year corporate bond to yieldmorethan the 3.25% Treasury.