The Federal Reserve tends to take actions to increase interest rates when the economy is very strong and to decrease rates when the economy is weak....

1. The Federal Reserve tends to take actions to increase interest rates when the economy is very strong and to decrease rates when the economy is weak.True False 2. Koy Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) × 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Koy's bonds?a.