What is its default risk premium

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The real risk-free rate, r*, is 1.85%. Inflation is expected to average 2.55% a year for the next 4 years, after which time inflation is expected to average 4.35% a year. Assume that there is no maturity risk premium. An 11-year corporate bond has a yield of 11.95%, which includes a liquidity premium of 0.55%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %

Reference no: EM131456394

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