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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

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 Component Symbol
As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this uncertainty.
This is the rate for a short-term riskless security when inflation is expected to be zero.
It is based on the bonds rating; the higher the rating, the lower the premium added, thus lowering the interest rate.
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 securitys entire life.
This is the rate for a riskless security that is exposed to changes in inflation.
This is the premium added to the equilibrium interest rate on a security that cannot be bought or sold quickly enough to prevent or minimize loss.

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