You read in The Wall Street Journal that 30-day T-bills are currently yielding 4%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: • Inflation premium = 3.25% • Liquidity premium = 0.7% • Maturity risk premium = 1.85% • Default risk premium = 2.45% On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.
You read in The Wall Street Journal that 30-day T-bills are currently yielding 4%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: • Inflation premium = 3.25% • Liquidity premium = 0.7% • Maturity risk premium = 1.85% • Default risk premium = 2.45% On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.
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 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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