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 The real riskfree rate of interest is 3 percent. Inflation is expected to be 2 percent this year and 4 percent during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 3year Treasury securities?
 The real riskfree rate is 2.5%. Inflation is expected to average 2.8% a year for the next 4 years, after which time inflation is expected to average 3.75% a year. Assume that there is no maturity risk premium. An 8year corporate bond has a yield of 8.3%. Assume that the liquidity premium on the corporate bond is 0.75%. What is the default risk premium on the corporate bond
3. The real risk free rate is 3%, and inflation is expected to be 3.5% for the next 2 years. A 2 year treasury security yields 6.8%. What is the maturity risk premium for the 2 year security?
4. The real risk free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 2% for the following 2 years. Assume that the maturity risk premium is 0. What is the yield on 2 year Treasury securities? What about 4 year treasury securities5
5
You read in The Wall Street Journal that 30day Tbills are currently yielding 5.5%. Your brotherinlaw, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
Inflation premium= 3.25%
Liquidity premium= 0.6%
Maturity risk premium= 1.8%
Default risk premium= 2.15%
On the basis of these data, what is the real riskfree rate of return?

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