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ion 4

1. Calculate a table of interest rates for 5 years based on the following information:
   

   • The pure interest rate is 2%
   • Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5%
   • The default risk is .1% for year one and increases by .1% over each year
   • Liquidity premium is 0 for year 1 and increases by .2% each year
   • Maturity risk premium is 0 for years 1 and 2 and .3% for years 3-5