1. Calculating interest rates The real risk-free rate (*) is 2.8% and is expected to remain constant Inflation is expected to be 3% per year for each of the next five years and 2 thereafter The maturity nisk premium (MRP) is determined from the formula: 0.1(t-1), where is the security's matunty. The qudity premium (LP) on at National Transmissions Corp bonds 0.55. The following table shows the current relationship between bond ratings and default eisk premium ( Default Risk Premium Rating U.S. Treasury MA NA 0.60% 0.00 1.05 A 350 yield on one of these bonds? Dard cross-product terms that National Converted bonds. What is veraging is required, the writhmetic wege 6.74 749 6.93 ed on your understanding of the determinants of intereses, even remains the man, which of the following will be true In theory, the end with a maturity with her than the one bond with a more mature A 100 warna warun as compared to bend Grade Now Bave a Continue Continue with 3. Calculating interest rates The real risk free rate (*)# 2.8% and is expected to remain constant Inflation is expected to be per year for each of the next five years and 2 thereafter The maturity risk premium (MRP) is determined from the formula: 0.1(t-1), where is the security's maturity. The liquidity remium (LP) National Transmissions Corp.'s bonds 0.554. The following table shows the current relationship between bond rating and default risk premium (ORP) Default Risk Premium Rating U.S. Treasury AA 0.60 0.80 1.05 A BBS 1.45% National Transmissions Corp. issues 8-year AA-rated bonds. What is the yield on one of these bonds? Disregard crost-product terms, the overaging is required, use the arithmetie average. 6.789 7.4894 6.93% 4.85 Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? In theory, the yield on a bond with a longer maturity will be higher than the yield on a bond with a shorter maturity A BBB-rated bond has a lower default risk premium as compared to an AAA-rated bond. Grado e NOW Save & Continue Continue without saving