You read in The Wall Street Journal that 30-day T-bills are c n-law, a broker at Kyoto Securities, has given you the follow premiums: nflation premium _iquidity premium 1% Maturity risk premium 2% Default risk premium 2% 5%
You read in The Wall Street Journal that 30-day T-bills are c n-law, a broker at Kyoto Securities, has given you the follow premiums: nflation premium _iquidity premium 1% Maturity risk premium 2% Default risk premium 2% 5%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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
Transcribed Image Text:You read in The Wall Street Journal that 30-day T-bills are currently yielding 9 percent. Your brother-
in-law, a broker at Kyoto Securities, has given you the following estimates of current interest rate
premiums:
Inflation premium
Liquidity premium
Maturity risk premium 2%
Default risk premium
2%
5%
1%
Based on these data, the real risk-free rate of return is:
Expert Solution

Step 1
The yield on the the treasury bills are considered to be the risk because they are issued by federal bank and are quite safe and without risk.
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Solved in 2 steps

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