Question
You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.7%. Your brother-in-law, a broker at Safe and Sound Securities, has given
You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.7%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places. %__?__
An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the real rate and inflation. If the real risk-free rate is 5% and inflation is expected to be 18% each of the next 4 years, what is the yield on a 4-year security with no maturity, default, or liquidity risk? (Hint: Refer to "The Links Between Expected Inflation and Interest Rates: A Closer Look".) Round your answer to two decimal places. %__?__ |
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