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You are given the following data:
k* = real risk-free rate = 3.25%
Constant inflation premium = 6.55%
Maturity risk premium = 0.95%
Default risk premium for AAA bonds = 3.25%
Liquidity premium for long-term T-bonds = 2.85%
Assume that a highly liquid market does not exist for long-term T-bonds, and the expected rate of inflation is a constant. Given these conditions, the nominal risk-free rate for T-bills is ______, and the rate on long-term Treasury bonds is ______.
Linear Mode
