3. Determinants of market interest rates Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic Characteristic Component Symbol This is the rate on short-term U.S. Treasury securities, assuming there is no inflation. 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. This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time This is the rate for a riskless security that is exposed to changes in inflation. This is the premium that reflects the risk associated with changes in interest rates for a long-term security