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eBook Problem Walk-Through You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound

eBook Problem Walk-Through

You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

  • Inflation premium = 2.50%
  • Liquidity premium = 0.6%
  • Maturity risk premium = 1.85%
  • Default risk premium = 2.30%

On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.

%

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