On the first day of your summer internship, you've been assigned to work with the Chief Financial Officer (CFO) of San Blas Jewels Inc Not knowng how well trained you are, the CFO has decided to test your understanding of interest rates. Specifically, she asks you to provide a reasonable estimate of the nominal interest rate for a new issue of AAA-rated bonds to be offered by SanBlas Jewels Inc. The final format that the chief financial officer of SanBlas Jewels has requested is that of equation (2-1) in the text Nominal interest rate - real nak: free interest rate + inflation premium * defaut risk premium 5. + maturity-risk premium + liquidity-risk premium ent do Some agreed upon procedures related to generating estimates for key variables in equation (2-1) follow a. The current 3-month Treasury bill rate is 291 percent, the 30-year Treasury bond rate is 5.42 percent, the 30-year AAA-rated corporate on Al bond rate is 6.84 percent, and the inflation rate is 2.07 percent b. The real nak tree rate of interest is the difference between the calculated average yield on 3-month Treasury bits and the inflation rate What is the real risk tree inerest rat? son % Round to two decimal places) idity What is the inflation premium? Round to two decimal places) stratec What is the defaut-rak premium? sion with Round to two decimalus) What is the malurityisk premium? dism antis Enter your answer in each of the answer boxes 0 00 9 delete Y U 1 O { [ } 1 H K L return a. The current 3-month Treasury bill rate is 2.91 percent, the 30-year Treasury bond rate is 5.42 b. The real risk-free rate of interest is the difference between the calculated average yield on 3-m c. The default-risk premium is estimated by the difference between the average yields on AAA-rat d. The maturity-risk premium is estimated by the difference between the average yields on 30-yea e. SanBlas Jewels' bonds will be traded on the New York Bond Exchange, so the liquidity-risk prer other jewelry sellers. It is estimated at 7 basis points. A basis point is one one-hundredth of 1 perce Now place your output into the format of equation (2-1) so that the nominal interest rate can be estir What is the real risk-free interest rate? [ % (Round to two decimal places.) What is the inflation premium? 0% (Round to two decimal places.) What is the default-risk premium? [% (Round to two decimal places.) What is the maturity-risk premium? Enter your answer in each of the answer boxes, Stay ahead in class with practice exams 6,507 25 esc Q Search or enter # N 1 2 3 % 5 4 Q W E tab R Ige, so the liquidity-risk other jewelry sellers. It is estimated at 7 basis points. A basis point is one one-hundredth of 1 p Now place your output into the format of equation (2-1) so that the nominal interest rate can be 1% (Round to two decimal places.) What is the maturity-risk premium? [ % (Round to two decimal places.) What is the liquidity-risk premium? [ % (Round to two decimal places.) What is the nominal interest rate? % (Round to two decimal places.) Enter your answer in each of the answer boxes. Stay ahead in class with practice exams 5,607 25 esc Search or enter @ 6 % 1 2 3 4 5 Q tab W E R
