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Real risk-free rate of return

30-day T-bills are currently yielding 8 percent.
Current interest rate premiums:

Inflation premium: 5%
Liquidity premium: 1%
Maturity risk premium: 2%:
Default risk premium: 2%

Calculate the real risk-free rate of return.

Solution Summary

The solution calculates the real risk-free rate of return using Inflation premium, Liquidity premium, Maturity risk premium, and Default risk premium.