You read in The Wall Street Journal that 30-day T-bills are currentlyyielding 5.8%. Your brother-in-law, a broker at Safe and Sound Securities, has given you thefollowing estimates of current interest rate premiums:Inflation premium = 3.25%Liquidity premium = 0.6%Maturity risk premium = 1.85%Default risk premium = 2.15%On the basis of these data, what is the real risk-free rate of return?

Question

You read in The Wall Street Journal that 30-day T-bills are currently
yielding 5.8%. 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 = 0.6%
Maturity risk premium = 1.85%
Default risk premium = 2.15%
On the basis of these data, what is the real risk-free rate of return?

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