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:
- Inflation premium = 3.00%
- Liquidity premium = 0.5%
- Maturity risk premium = 2.15%
- Default risk premium = 2.90%
On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.
%
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Introduction To Derivatives And Risk Management
Authors: Robert Brooks, Don M Chance
9th Edition
1133190197, 978-1133190196
