Question: Interest premium . Estimate the default premium and the maturity premium given the following three investment opportunities: a Treasury bill with a current interest rate

Interest

premium.

Estimate the default premium and the maturity premium given the following three investment opportunities: a Treasury bill with a current interest rate of 3.5%; a Treasury bond with a twenty-year maturity and a current interest rate of 5.5%; and a AAA, corporate bond with a twenty-year maturity and an interest rate of 7.0%.

What is the default premium?

What is the maturity premium?

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