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You read in The Wall Street Journal that 30-day T-bills, a good proxy for riskfree interest rate, are currently yielding 8%. Your friend who is
You read in The Wall Street Journal that 30-day T-bills, a good proxy for riskfree interest rate, are currently yielding 8%. Your friend who is a broker has given you the following estimates of current interest rate premiums: Inflation premium = 5%, Liquidity premium = 1%, Maturity risk premium = 2%, and Default risk premium = 2%. Calculate the real riskfree interest rate. Question 12 options: 1) 0% 2) 1% 3) 2% 4) 3%
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