Question: How do you find Default Risk Premium?? The real risk-free rate, r*, is 1.55%. Inflation is expected to average 1.8% a year for the next

How do you find Default Risk Premium??

The real risk-free rate, r*, is 1.55%. Inflation is expected to average 1.8% a year for the next 4 years, after which time inflation is expected to average 3.55% a year. Assume that there is no maturity risk premium. An 11-year corporate bond has a yield of 8.6%, which includes a liquidity premium of 0.85%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places.

When I had originally asked, the answer I got was 3.53% which isn't correct. What am I doing wrong?

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