E$-$Finance Chapter $7$ Exercise $1$

Voice River, Inc., provides media$-$on$-$demand services via the Internet. Management has been studying current interest rates. A lender is willing to make a two$-$year loan to Voice River at a $12$ percent annual interest rate. The U$.$S$.$ government is currently paying $8$ percent annual interest on its two$-$year securities$.$

A$)$ If the real rate of interest is expected to be $3$ percent annually, what is the inflation premium expected at this time?

B$)$ What is the amount of the total risk premium that Voice River will have to pay?

C$)$ If a $1$ percent liquidity premium is built into the $12$ percent rate, what is the default risk premium on the loan?

Answers are percent $(\%)-$ please enter as whole numbers, no decimals and no percent sign.