$7.$ 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

It is calculated by adding the inflation premium to r$*.$ Nominal risk$-$free rate rRF

This is the difference between the interest rate on a US Treasury bond and a corporate bond of the same profile$$that is$,$ the same maturity and marketability. Default risk premium DRP

This is the premium that reflects the risk associated with changes in interest rates for a long$-$term security. Maturity risk premium MRP

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. Liquidity risk premium LP

This is the premium added to the real risk$-$free rate to compensate for a decrease in purchasing power over time. Inflation premium IP

It changes over time, depending on the expected rate of return on productive assets exchanged among market participants and people$$s time preferences for consumption. Real risk$-$free rate rRF