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QUESTION 1 You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is

QUESTION 1

  1. You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 3.25 percent and the inflation premium is 3 percent. US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form.

    A.

    5.06%
    B.

    5.32%
    C.

    6.35%
    D.

    6.09%
    E.

    5.83%
    F.

    5.58%

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