Interest rate risk-default risk-taxability-lack of liquidity

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Reference no: EM131190269

Interest Rates and Bond Valuation

According to the textbook’s discussion, the Fisher Equation can be expressed as Nominal Interest Rate ≈ Real Rate + Expected Inflation. The textbook further explains that the nominal interest rate on any financial instrument is a function of not only the real rate and expected future inflation, but also interest rate risk, default risk, taxability, and the lack of liquidity. find the following rates recorded for the latest month?

Federal Funds _______

4-Week Treasury bills ________

6-Month Treasury bills ________

10-Year Treasury bonds ________

20-Year Treasury bonds ________

30-Year Treasury bonds ________

Moody’s seasoned

Corporate Bonds

Aaa ________

Baa ________

Provide in the space below an explanation for the determination of the latest monthly rate on Moody’s seasoned corporate bonds rated Baa based on the above rates and the factors that determine nominal interest rates.

Reference no: EM131190269

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