Question:
Calculate a table of interest rates based on the following information:
The pure interest rate is 1.6%.
Inflation expectations for year 1 = 3%, year 2 =3.5%, years 3-5 =5%.
The default risk is .1% for year one and increases by .2% 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 .2% for years 3-5.