Nominal rate describes the observed or stated interest rate. Real rate describes the interest rate in addition to the inflation rate expected on a risk free loan. Risk free rate is the interest rate on debts that is virtually free of default risk. Prime rate is the interest rate charged by banks to their highest quality customers.
Answer: option B
Higie a. real rate b. nominal rate C. risk-free rate d. prime rate Sae. inflation rate...
Which of these is TRUE of the nominal risk-free rate and the real risk-free rate? Real risk-free rate must always include inflation premium Nominal risk-free rate includes inflation while real risk-free rate does not Real risk-free rate excludes the product of inflation and inflation premium None of the above
Risk-free rate and risk premiums The real rate of interest is currently 3%; the infla- tion expectation and risk premiums for a number of securities follow. P6-8 Inflation expectation Security Risk premium Premium 6% 3% 2 2 D 5 4 E 11 1 a. Find the risk-free rate of interest, RE, that is applicable to each security. b. Although not noted, what factor must be the cause of the differing risk-free rates found in part a? c. Find the nominal...
The nominal, risk-free rate on T-bills recently is 1.95%. If the real rate of interest is 0.75%, what is the expected level of inflation?
Suppose the nominal risk-free rate of interest in US is 3%, and that of Canada is 2%. The inflation rate in US is 5%, what is the inflation rate in Canada? A. 1% B.-1% C.2% D.4% E none
The real risk-free rate is 2%, and inflation is expected to be 3% this year, 4% in year 2, 5% in year 3 and then 3.5% thereafter. The maturity risk premium is estimated to be 0.50x(t-1), where t=number of years to maturity. What is the nominal interest rate on a 15-year Treasury security?
I need help with the following questions :) 34 This rate is another word for the US Treasury rates which we follow every class a· b. c. d e the real rate the nominal rate the required rate the expected rate risk free rate 35 The nominal rate is whereas the real rate of return is made up of a. b. c. d. e. the stated rate/prime rate minus labor the stated rate /the nominal rate minus inflation inflation rate/...
Suppose the nominal risk-free rate of interest in US is 3%, and that of Canada is 2%. The inflation rate in US is 5%, what is the inflation rate in Canada? A.1% OB.-1% C.2% D.4% E none
13) The nominal required return on XYZ stock is 14%. The nominal risk-free rate of return is 4% and the real risk-free rate of return is 2%. How much are investors requiring as compensation for risk? What is the inflation premium?
The real risk-free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 3% thereafter. The maturity risk premium is estimated to be 0.0003 x (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places.
If the inflation rate is zero, then A.) both the nominal interest rate and the real interest rate can fall below zero. B.) the nominal interest rate can fall below zero, but the real interest rate cannot fall below zero. C.) the real interest rate can fall below zero, but the nominal interest rate cannot fall below zero. D.) neither the nominal interest rate nor the real interest rate can fall below zero.