Unit 7 1. You are given the following data: r = real risk-free rate = 4% = 7% Constant inflation premium Maturity risk premium = 1% 3% Default risk premium for AAA bonds Liquidity premium for long-term T-bonds = 2% Assume that a highly liquid market does not exist for long-term T-bonds, and the expected rate of inflation is a constant. Given these conditions, the nominal risk-free rate for T-bills is and the rate on long-term Treasury bonds is a. 4%: 14% b. 4%: 15%. c. 11%: 14% d. 11%: 15% e. 11%; 17%