# Yield Rate on a Year Corporate Bond Explanation

You read in the Wall Street Journal that a 30 day T-bill currently is yielding 8%. Your brother in law, a broker for Madoff Investments has given you the following estimates of current interest rate premiums.

Inflation Premium 5%

Liquidity Premium 1%

Maturity Risk Premium 2%

Default Risk Premium 2%

Based on these data, what is the real risk free rate of return?

What is the yield on a one year corporate bond with a $1000 face value that pays a 12% annual dividend if it was purchased for $950 and held until maturity?

If you require a 20% yield on a one year corporate bond with a $1000 face value and a 12% annual premium what is the most you should be willing to pay for this bond?

https://brainmass.com/business/bond-valuation/yield-rate-on-a-year-corporate-bond-explanation-296296

#### Solution Preview

Yield Rate on a Year Corporate Bond Explanation

You read in the Wall Street Journal that a 30 day T-bill currently is yielding 8%. Your brother in law, a broker for Madoff Investments has given you the following estimates of current interest rate premiums.

Inflation Premium 5%

Liquidity Premium 1%

Maturity Risk Premium 2%

Default Risk Premium 2%

Based on these data, what is the real risk free rate of return?

The real risk free rate of return for a 30 day T-bill is 8% because T-bill does not have any premium as ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what is the real risk free rate of return.