Real risk-free interest rate-constant inflation premium

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Real risk-free interest rate – 4% Constant inflation premium – 7% Maturity risk premium – 1% Default risk premium for AAA bonds – 3% Liquidity premium for long-term treasury bonds – 2 % Assume that a highly liquid market does not exist for long-term T-bonds and the expected rate of inflation is constant. Given these conditions, the nominal risk-free rate for the T-bill is _______, and the rate for the long-term T-bonds is ____________ .

Reference no: EM13874832

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