3. Determinants of market interest rates Aa Aa Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Component Symbol Characteristic This is the rate for a short-term riskless security when inflation is expected to be zero. As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this uncertainty. This is the rate for a riskless security that is exposed to changes in inflation. Over the past several years, Germany, Japan, and Switzerland have had lower interest rates than the United States due to lower values of this premium. It is based on the bond's rating; the higher the rating, the lower the premium added, thus lowering the interest rate. It is based on the bond's marketability and trading frequency; the less frequently the security is traded, the higher the premium added, thus increasing the interest rate