Please show all steps to reproduce:
You would like to issue a 10 year bond and anticipate that the market requires a 3% default risk premium, of which part of the issue would add 1% liquidly premium to the required interest rate.
The 10 year treasury rate is 2% and the TIPS rate is 0.4%.
If the 10 year maturity premium is 0.4%, what interest rate would you expect to pay on the issue?
a. 4.4%
b. 4.8%
c. 6.4%
d. 6.8%