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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

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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 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. It is based on the bond's marketability and trading frequency; the less frequently the security is traded, the higher premium added, thus increasing the interest rate. || This is the rate for a short-term riskless security when inflation is expected to be zero. This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time. This is the premium added as a compensation for the risk that an investor will not get paid in full. It is calculated by adding the inflation premium to r*

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