You read in The Wall Street Journal that 30-day T- bills are currently yielding 5.5%. 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 1.8%
Default risk premium 2.15%
On the basis of these data, what is the real risk-free rate of return?© BrainMass Inc. brainmass.com June 4, 2020, 12:29 am ad1c9bdddf
On the basis of these data, what is the real risk- free rate of return?
k = k* + IP + DRP + LP + MRP
k = return on a debt security ...
Calculates real risk-free rate of return.