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If you expect the inflation premium to be 2%, the default risk premium to be 1%...

If you expect the inflation premium to be 2%, the default risk premium to be 1% and the real interest rate to be 4%, what interest would you expect to observe in the marketplace on short term treasury securities?

a. 8%

b. 7%

c. 6%

d. 5%
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Answer #1

Short term interest rate = Inflation premium + default risk premium + real interest rate

short term interest rate = 2% + 1% + 4%

Short term interest rate = 7%.

Answer: Option B.

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Answer #2

6% idk why 

answered by: a
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