The nominal interest rate is computed as:O Real Risk free rate + Default Risk PremiumReal Risk Free Rate + Inflation premium - Default risk premium + Liquidity premium - Maturity risk premiumO Real Risk Free Rate+ Inflation premium+ Liquity premium+ Default risk premium+ Maturity risk premiumO Real Risk Free Rate- Inflation premium- Default risk premium- Liquidity risk premium- maturity risk premium

Nominal interest rate refers to the interest rate before taking inflation into account.

The nominal interest rate is computed as: O Real Risk free rate + Default Risk Premium Real Risk Free Rate + Inflation premium - Default risk premium + Liquidity premium - Maturity risk premium Real Risk Free Rate+ Inflation premium+ Liquity premium+ Default risk premium+ Maturity risk premium Real Risk Free Rate- Inflation premium- Default risk premium- Liquidity risk premium- maturity risk premium

The nominal interest rate is computed as: O Real Risk free rate + Default Risk Premium Real Risk Free Rate + Inflation premium - Default risk premium + Liquidity premium - Maturity risk premium Real Risk Free Rate+ Inflation premium+ Liquity premium+ Default risk premium+ Maturity risk premium Real Risk Free Rate- Inflation premium- Default risk premium- Liquidity risk premium- maturity risk premium

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 9MC

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