Real risk-free rate-what is its default risk premium

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The real risk-free rate, r*, is 2.1%. Inflation is expected to average 3.2% a year for the next 4 years, after which time inflation is expected to average 4.05% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 8.85%, which includes a liquidity premium of 0.35%. What is its default risk premium? Round your answer to two decimal places.

Reference no: EM13849353

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