Nominal Rate = Real Rate + Inflation Rate
0.058 = Real Rate + 0.0325
Real Rate = 2.55%
If a T-bill has a rate of 5.8% and the current inflation premium is 3.25%, then...
6-2 REAL RISK-FREE RATE You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.8%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: • Inflation premium = 3.25% • Liquidity premium = 0.6% • Maturity risk premium = 1.85% • Default risk premium = 2.15% On the basis of these data, what is the real risk-free rate of return?
The real risk-free rate is 2.00%, and inflation is expected to be 3.25% for the next 2 years. A 2-year Treasury security yields 8.50%. What is the maturity risk premium for the 2-year security? Round your answer to two decimal places.
5. Problem 6.09 (Expected Interest Rate) eBook The real risk-free rate is 3.25%. Inflation is expected to be 4.25% this year, 4.45% next year, and 2.3% thereafter. The maturity risk premium is estimated to be 0.05 x (t-1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places.
Average Annual Rates Standard Deviation T-Bills Inflation Real T-Bill T-Bills Inflation Real T-Bill All months 3.46 2.10 0.56 3.12 4.07 3.81 First half 1.04 1.68 − 0.29 1.29 5.95 6.27 Recent half 4.45 3.53 0.90 3.11 2.89 2.13 (1926-2016) Market Index Big/ Growth Big/ Value Small/ Growth Small/ Value Mean excess return (annualized) 0.83 7.98 11.67 8.79 15.56 Standard deviation (annualized) 18.64 18.50 24.62 26.21 28.36 Suppose that the inflation rate is expected to be 2.10% in the near future...
(Interest rate determination) If the 10-year Treasury bond rate is 6.4%, the inflation premium is 1.9%, and the maturity-risk premium on 10-year Treasury bonds is 0.2%, assuming that there is no liquidity-risk premium on these bonds, what is the real risk-free interest rate? The real risk-free interest rate is _____%. (Round to one decimal place.)
EXPECTED INTEREST RATE The real risk-free rate is 2.05%. Inflation is expected to be 2.3% this year, 4.55% next year, and 2.55% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round your intermediate calculations. Round your answer to two decimal places.
Suppose the real risk free rate : 4.205. Expected inflation - 1.10 Maturity riak premium, P = 0.10(E) where to the years to maturity. Calculate for the return of year Treasury security? a. 7.50 b. 7.80 c. 7.701 13. Pirms five year bonds. yield -6.201; Five year Treasury bonds yield - 4.401. Real risk-free rate, r. - 2.51. Expected inflation for five yar bonds, IP - 1.501. Liquidity premium for AA bond, LP - 0.51 and zero for Treasury bonds....
Given the following information, Real risk-free rate = 0.025 Inflation risk premium = 0.015 Maturity risk premium = 0.05 Default risk premium = 0.035 Liquidity risk premium = 0.01 (1) Using approximation method, what is the real rate of interest? (2) Using Fisher equation, what is the real rate of interest?
The real risk-free rate is 2.55%, inflation is expected to be 2.15% this year, and the maturity risk premium is zero. Taking account of the cross-product term, i.e., not ignoring it, what is the equilibrium rate of return on a 1-year Treasury bond? What would it be if the approximation method is used? Show work and 4 decimals.
The real risk-free rate is 2.5% and inflation is expected to be MATURITY RISK PREMIUM 2.75% for the next 2 years. A 2-year Treasury security yields 5.55%. What is the maturity risk premium for the 2-year security? 65 6-6 INFLATION CROSS-PRODUCT An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the real rate and inflation. If the real risk-free...