Question
18. Real Risk-Free Rate You read inThe Wall Street Journalthat 30-day T-bills are currently yielding 4.5%. Your brother-in-law, a broker at Safe and Sound Securities,
18.
Real Risk-Free Rate
You read inThe Wall Street Journalthat 30-day T-bills are currently yielding 4.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
Inflation premium = 2.5%
Liquidity premium = 1.1%
Maturity risk premium = 2.3%
Default risk premium = 2.6%
On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.
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Introduction to Finance Markets, Investments and Financial Management
Authors: Ronald W. Melicher, Edgar A. Norton
16th edition
1119398282, 978-1-119-3211, 1119321115, 978-1119398288
