What is the real risk-free rate on a 5-Year Treasury Bond?
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5-year Treasury bonds yield 5.5%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%. What is the real risk-free rate, r*?
a. 2.59%
b. 2.88%
c. 3.20%
d. 3.52%
e. 3.87%
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This solution explains how to determine the real risk-free rate interest rate with a simple formula and calculations.
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5-year Treasury bonds yield 5.5%. The inflation premium (IP) is 1.9%, and the ...
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