Real risk-free rate

Assignment Help Financial Management
Reference no: EM131583477

Real Risk-Free Rate You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.9%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: Inflation premium = 3.5% Liquidity premium = 0.2% Maturity risk premium = 1.7% Default risk premium = 2.75% On the basis of these data, what is the real risk-free rate of return? Round your answer to two decimal places.

Reference no: EM131583477

Questions Cloud

What cost does this return calculation fail to account : what cost does this return calculation fail to account for that could significantly change the calculated return?
What is the default risk premium on the corporate bonds : If the liquidity premium is 0.6%, what is the default risk premium on the corporate bonds?
Considering two mutually exclusive-required projects : Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below.
What is yield on three-year treasury securities : Expected Interest Rate The real risk-free rate is 3%. What is the yield on 3-year Treasury securities?
Real risk-free rate : You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.9%. Your brother-in-law, a broker at Safe and Sound Securities,
Compute dividends over the next five years : Compute the dividends over the next five years.
Values for a baii plus financial calculator : You expect to earn 12% annually on the account. How many years will it take to reach your goal?
Calculating annuity future values-make annual deposits : You are planning to make annual deposits of $3,960 into a retirement account that pays 8 percent interest compounded monthly.
Required projects with the cash flows : Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below.

Reviews

Write a Review

Financial Management Questions & Answers

  Corporate tax rate-what is the NPV of the project

Suppose Klausenheimer, Inc. is considering a new project. The project alone will cost $50,000,000 and is expected to generate after-tax cash flows of $5,000,000, $6,000,000 and 7,000,000 during the first three years. To account for the additional ris..

  What is discounted sum of revenue and costs in year three

A family woodland property is being sold by your parents who are retiring. What is the discounted sum of revenue and costs in year 3

  At what rate does the firm just break even

Consider a firm with a contract to sell an asset for $150,000 five years from now. The asset costs $86,000 to produce today. Given a relevant discount rate on this asset of 12 percent per year, calculate the profit the firm will make on this asset. A..

  Which loan has the lower effective annual interest rate

which loan has the lower effective annual interest rate?

  Calculate the expected return in japanese deposits

In June 2014, a Korean investor is considering investing in bank deposits in Korea and Japan. The annual interest rate on Korean deposits is 4%, versus 1.25% on deposits in Japan. Does covered interest parity hold in this example? If so, how do you k..

  Stock according to the security market line

What is your total return on the stock? What is the dividend yield? What is the capital gains yield and what is the expected return of the stock according to the security market line?

  Globalization of markets and the globalization of production

As the drivers of globalization continue to pressure both the globalization of markets and the globalization of production, we continue to see the impact of greater globalization on worldwide trade patterns. What types of countries dominate these rou..

  Amount of annual payment that is going to pay off debt

In December 2013, Dayanara bought a new BMW 328i car for $ 70,000 and paid $ 8,000 in cash. It agreed with the XYZ Bank to pay the balance making equal annual payments in 6 years, at 9% interest. Determine the amount of the annual payment that is goi..

  What is the expected value of next year annual dividend

What is the expected value of next year's annual dividend if the firm expects its earnings per share to be $4.94?

  Identify companies that have globalized well

Identify companies that have globalized well. What did they do to make it successful?

  Describe how the variables of group communication conflict

Describe how the variables of group communication-conflict, conformity, and consensus-were or were not incorporated. Was groupthink an issue?

  Find the cash value of insurance

Victor has a $10,000 cash-value policy purchased 15 years ago when he was 25 years old. The policy will be paid at age 65. Find the cash value of insurance. Jack earned 6.5% last year on a $7500 investment in taxable bonds. If the applicable tax rate..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd