What would be the default risk premium

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Reference no: EM13284175

You are considering an investment in a one-year gov't debt security with a yield of 5 % or a highly liquid corporate debt security with a yield of 6.5%. The expected inflation rate for the next year is expected to be 2.5%.

a) What would be your real rate earned on either of the two investments?

b) What would be the default risk premium on the corporate debt security?

Reference no: EM13284175

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