Question
1) The risk free rate on treasury bills is 2.40%. Inflation is 1.3%. What is the real rate of return on treasury bills? Meaning of
1)
The risk free rate on treasury bills is 2.40%. Inflation is 1.3%. What is the real rate of return on treasury bills?
Meaning of what is the "real rate of return" ?
If investor saw calculated number two from above, would he be pleased or not?
2)
The nominal return on treasury bonds is 2.7%, the maturity risk premium is 0.2%. Real return can earn 0.3%.
What is the inflation premium?
Why is there maturity risk premium on US treasury bonds vs. bills?
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Financial Markets And Institutions
Authors: Anthony Saunders, Marcia Cornett
4th Edition
0077262379, 978-0077262372
