You read in the Wall Street Journal that 30-day Treasury bills are currently yielding 8 percent. His brother-in-law, a Kyoto stockbroker, has provided him with the following estimates of current interest rate premiums:
inflation = 5%
liquidity premium = 1%
maturity risk premium = 2%
default risk premium = 2%
Based on these data, what is the real risk-free rate of return? (What is the interest rate on government Treasury bills, less applicable premiums?)