Question $5(2$ points$)$

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The default risk premium:

compensates investors for interest rate risk, which is that long$-$term securities are more price sensitive to interest changes than short$-$term securities$.$

is equal to eximected inflation over the life of the security

is added to the equilibrium interest rate on a security if the security cannot be converted to cash quickly at close to "fair market value."

is the difference between the interest rate on a U$.$S$.$ Treasury bond and a corporate bond of equal maturity and marketability