CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
6th Edition
ISBN: 9781337407342
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 5, Problem 12PROB
Summary Introduction
Risk free rate:
Interest rate which has no risk of loss. For risk free rate risk is zero.
Calculate the forward risk free rate as follows:
Given one year inflation rate is 1.4%, year two inflation rate is 1.8% and 2% after year 2. Assume the real risk free rate is 3%.
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