Question
I need help with these questions: This is the following information: real rate=2%; liquidity premium=2%; default risk premium=4%; maturity risk premium=3%; and average annual inflation
I need help with these questions:
- This is the following information: real rate=2%; liquidity premium=2%; default risk premium=4%; maturity risk premium=3%; and average annual inflation premium=3%, Can you help me find the nominal rate of interest for:
10-year Treasury Note
10-year Corporate Bond
Given the following information: average annual inflation premium=3%; maturity risk premium=2.5%; real rate=3%; liquidity premium=0%; and nominal interest rate=10%, find the default risk premium for:
10-year Treasury Note
10-year Corporate Bond
Assume the interest rate on a one-year Treasury bill is 4% and the rate on two-year note is 6%.
If the expected real rate of interest is 3%, determine the inflation premium on the Treasury bill.
If the maturity risk premium is expected to be zero, determine the inflation premium on the Treasury note.
What is the expected inflation premium for the second year?
The interest rate on a 10-year Treasury bond is 8.25%. A comparable-maturity Aaa-rated corporate bond is yielding 9%. Another comparable-maturity, but lower-quality corporate bond has a yield of 12%, which includes a liquidity premium of .2% .
Determine the default risk premium on the Aaa-rated bond.
Determine the default risk premium on the lower-quality bond corporate bond.
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