Question: It is estimated that inflation will average 3.40% per year for the next 4 years, and average 4.60% each year thereafter. For a real risk-free

It is estimated that inflation will average 3.40% per year for the next 4 years, and average 4.60% each year thereafter. For a real risk-free rate of 3.20%, what is the default risk premium of a 10-year corporate bond with a vield of 13.20%? Assume that the liquidity premium is 2.20%, but there is no maturity risk premium.

3.42% 3.79% 3.90% 3.31% 3.68%

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