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REAL RISK-FREE RATE You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: Inflation prcmium= 3.25% Liquidity premium =0.6% Maturity risk premium = 1.8% Default risk premium = 2.15% On the basis of these data, what is the real risk free rote cf return?

BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

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Chapter
Section
Chapter 6, Problem 2P
Textbook Problem

REAL RISK-FREE RATE You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

  • Inflation prcmium= 3.25%
  • Liquidity premium =0.6%
  • Maturity risk premium = 1.8%
  • Default risk premium = 2.15%

On the basis of these data, what is the real risk free rote cf return?

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