5-year Treasury bonds yield 5.6%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.4%. There is no
5-year Treasury bonds yield 5.6%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.4%. There is no liquidity premium on these bonds. What is the real risk-free rate, r*?
| a. | 2.97% | |
| b. | 3.07% | |
| c. | 2.61% | |
| d. | 3.30% | |
| e. | 2.84% |
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Authors: Paula H. Song, Kristin L. Reiter
4th Edition
1640553223, 978-1640553224
