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 Symbol Component This is the rate on a Treasury bill or a Treasury bond This is the premium added to the risk-free rate that reflects the average sustained increase in the general level of prices for goods and services expected over the security's entire life. This is the premium that reflects the risk associated with changes in interest rates for a long-term security This is the rate for a short-term riskless security when inflation is expected to be zero This is the premium added as a compensation for the risk that an investor will not get paid in full 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. Grade It Now Save & Continue Continue without saving Component Symbol IP LP MRP DRP IRF Grade It Now Save&Continue Continue without saving Symbol Component ined Nominal risk-free rate e security's Liquidity risk premium ates for a Real risk-free rate be zero. Inflation premium not get Maturity risk premium tly the Default risk premium rate. Grade It Now Save & Continue Continue without saving