The required rate of return can be broken down further into several components such as the inflation premium, default risk premium, liquidity risk premium, and so on. Based on your understanding of the components of required rate of return, identify the determinants with each characteristic described in the following table: Characteristic It changes over time, depending on the expected rate of return on productive assets exchanged among market participants and people's time preferences for consumption. This is the rate for a riskless security that is exposed to changes in inflation. This is the premium added to a real rate of interest to determine a nominal interest rate. This is the premium added as a compensation for the risk that an investor will not get paid in full. This is the premium that reflects the risk associated with changes in interest rates for a long-term security. Component Inflation premium Real rate of return Default risk premium Consider the following case: Maturity risk premium Nominal risk-free rate James bought shares of a heavily traded stock listed on the New York Stock Exchange (NYSE), whereas Victoria bought stocks of a rural bank with a very small number of shareholders. Whose investment is more exposed to marketability risk?