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The yield to maturity on Xerox Corporation bonds maturing in 2014 is 8.40 percent. The yield to maturity on a similar maturity U.S. government Treasury bond is 7.55 percent. The yield to maturity on 90-day Treasury bills is 6.11 percent.
a. What is the maturity risk premium between the Treasury bill and the Xerox bond?
b. What is the default risk premium on the Xerox bond?
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