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The inflation expectation and risk premium for a number of securities is presented on the following table: Security Inflation expectation premium Risk premium A 6%

The inflation expectation and risk premium for a number of securities is presented on the following table:

Security Inflation expectation premium Risk premium
A 6% 3%
B 9 2
C 8 2
D 5 4
E 11 1

The real rate of interest is currently 3%

a) Find de risk-free rate of interest , Rf, that is applicable to each security.

b)Find the nominal rate of interest for each security.

Note: Please show the answers and explain in words how you got to conclusions for better understanding ***

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