Question on risk premium approach for bonds

[crablegs]

Q. 3, p. 111 of CFAI book reading 23 asks about the risk premium approach for bonds.
Why is it that on the 10-yr MBS, we do not add:
The liquidity premium of 1%
The call risk spread of 80 bps
Only the expected inflation and prepayment risk is added?
Thank you,

 

[comp_sci_kid]

prepayment risk *includes* call risk in case of MBS

 

[crablegs]

Thx csk. That makes sense, but what about the liquidity premium then? I do realize MBS can ‘mature’ early due to prepayment, but shouldn’t a premium be added over the short term rfr to compensate?